UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 001-37717

Senseonics Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)	3841 (Primary Standard Industrial Classification Code Number)	~~47‑1210911~~47-1210911 (I.R.S. Employer Identification Number)

20451 Seneca Meadows Parkway

Germantown, MD ~~20876‑7005~~20876-7005

~~(301) 515‑7260~~(301) 515-7260

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	SENS	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes ~~☒No~~ ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ~~☒No~~ ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	☒	Accelerated filer ☐	~~Non‑accelerated filer ☒~~ ~~(Do not check if a smaller reporting company)~~☐
Non-accelerated filer	☐
Smaller reporting company ☐	☐
Emerging growth company ☒	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~136,754,458~~463,263,499 shares of common stock, par value $0.001, outstanding as of ~~October 30, 2017.~~May 6, 2022.

Senseonics Holdings, Inc.

Condensed Consolidated Balance ~~Sheets~~Sheets

(in thousands, except share and per share data)


	March 31,		December 31,
	2022		2021
		(unaudited)

Assets
Current assets:
Cash and cash equivalents	$	39,011	$	33,461
Short term investments, net		102,755		96,445
Accounts receivable, net		232		205
Accounts receivable, net - related parties		3,797		1,768
Inventory, net		7,153		6,316
Prepaid expenses and other current assets		7,629		6,218
Total current assets		160,577		144,413

Option		269		239
Deposits and other assets		786		1,086
Long term investments, net		25,145		51,882
Property and equipment, net		1,320		1,308
Total assets	$	188,097	$	198,928

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	2,089	$	1,204
Accrued expenses and other current liabilities		8,742		10,667
Accrued expenses and other current liabilities- related parties		3,674		3,597
Note payable, current portion, net		14,534		—
Derivative liability, current portion		1,713		—
Term Loans, net		732		2,926
Total current liabilities		31,484		18,394

Long-term debt and notes payables, net		48,035		59,798
Derivative liabilities		150,010		236,291
Option		47,700		69,401
Other liabilities		337		579
Total liabilities		277,566		384,463

Commitments and contingencies

Stockholders’ deficit:
Common stock, $0.001 par value per share; 900,000,000 shares authorized; 463,229,779 and 447,282,263 shares issued and outstanding as of March 31, 2022 and December 31, 2021		463		447
Additional paid-in capital		775,172		765,215
Accumulated other comprehensive loss		(837)		(212)
Accumulated deficit		(864,267)		(950,985)
Total stockholders' deficit		(89,469)		(185,535)
Total liabilities and stockholders’ deficit	$	188,097	$	198,928

September 30,

December 31,


2017

2016

(unaudited)

Assets





Current assets:

Cash and cash equivalents

$
29,783

$
13,047

Marketable securities

22,917

7,291

Accounts receivable

2,063

251

Inventory, net

2,413

477

Prepaid expenses and other current assets

1,899

365

Total current assets

59,075

21,431

Deposits and other assets

176

105

Property and equipment, net

887

735

Total assets

$
60,138

$
22,271

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:

Accounts payable

$
5,125

$
3,070

Accrued expenses and other current liabilities

7,554

4,666

Notes payable, current portion

7,500

3,889

Total current liabilities

20,179

11,625

Notes payable, net of discount

16,801

15,177

Accrued interest

842

273

Other liabilities

66

73

Total liabilities

37,888

27,148

Commitments and contingencies (Note 7)

Stockholders’ equity (deficit):

Common stock, $0.001 par value per share; 250,000,000 shares authorized, 136,691,128 and 93,569,642 shares issued and outstanding as of September 30, 2017 and December 31, 2016

136

94

Additional paid-in capital

269,662

199,751

Accumulated deficit

(247,548)

(204,722)

Total stockholders' equity (deficit)

22,250

(4,877)

Total liabilities and stockholders’ equity (deficit)

$
60,138

$
22,271

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)

(in thousands, except share and per share data)


	Three Months Ended
	March 31,
	2022		2021


Revenue, net	$	292	$	487
Revenue, net - related parties		2,189		2,359
Total revenue		2,481		2,846
Cost of sales		1,954		2,320
Gross profit		527		526

Expenses:
Sales and marketing expenses		1,509		1,613
Research and development expenses		7,804		5,255
General and administrative expenses		6,374		4,974
Operating loss		(15,160)		(11,316)
Other income (expense), net:
Interest income		93		9
Gain (Loss) on fair value adjustment of option		21,701		(52,675)
Gain on extinguishment of debt and option		—		330
Interest expense		(4,494)		(4,058)
Gain (Loss) on change in fair value of derivatives		84,569		(180,899)
Impairment cost, net		30		(782)
Other expense		(21)		(123)
Total other income (expense), net		101,878		(238,198)

Net Income (Loss)		86,718		(249,514)
Other comprehensive loss
Unrealized loss on marketable securities		(625)		—
Total other comprehensive loss		(625)		—
Total comprehensive income (loss)	$	86,093	$	(249,514)

Basic net income (loss) per common share	$	0.19	$	(0.68)
Basic weighted-average shares outstanding		455,942,886		364,274,433

Diluted net income (loss) per common share	$	(0.03)	$	(0.68)
Diluted weighted-average shares outstanding		605,198,839		364,274,433

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Revenue

$
2,097

$
37

$
3,464

$
56

Cost of sales

2,957

114

5,716

148

Gross profit

(860)

(77)

(2,252)

(92)

Expenses:

Sales and marketing expenses

2,089

733

4,478

2,001

Research and development expenses

9,765

6,883

22,368

20,838

General and administrative expenses

3,891

2,819

11,545

10,060

Operating loss

(16,605)

(10,512)

(40,643)

(32,991)

Other income (expense), net:

Interest income

129

35

187

69

Interest expense

(915)

(502)

(2,365)

(1,045)

Other income (expense):

12

92

(5)

3

Net loss

(17,379)

(10,887)

(42,826)

(33,964)

Total comprehensive loss

$
(17,379)

$
(10,887)

$
(42,826)

$
(33,964)

Basic and diluted net loss per common share

$
(0.13)

$
(0.12)

$
(0.39)

$
(0.39)

Basic and diluted weighted-average shares outstanding

128,898,682

93,386,139

108,959,779

87,838,031

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of ~~Cash Flows~~Changes in Stockholders’ Deficit

(in thousands)

Nine Months Ended

September 30,

2017

2016

Cash flows from operating activities

Net loss

$
(42,826)

$
(33,964)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense

145

107

Non-cash interest expense (debt discount and deferred costs)

339

87

Change in fair value of warrants

—

304

Stock-based compensation expense

2,740

1,780

Provision for lower of cost or net realizable value

208

—

Net realized gain on marketable securities

(59)

—

Changes in assets and liabilities:

Accounts receivable

(1,812)

—

Prepaid expenses and other current assets

(1,534)

432

Inventory

(2,144)

(329)

Deposits and other assets

(71)

68

Accounts payable

2,055

4,095

Accrued expenses and other current liabilities

2,927

(195)

Accrued interest

569

(200)

Deferred rent

13

18

Net cash used in operating activities

(39,450)

(27,797)

Cash flows from investing activities

Capital expenditures

(297)

(452)

Purchases of marketable securities

(25,867)

(9,176)

Sales and maturities of marketable securities

10,300

—

Net cash used in investing activities

(15,864)

(9,628)

Cash flows from financing activities

Proceeds from issuance of common stock, net of issuance costs

66,870

45,737

Proceeds from exercise of stock options

239

65

Proceeds from notes payable, net of costs

4,896

17,500

Proceeds from issuance of warrants

104

—

Repayments of notes payable

—

(12,500)

Principal payments under capital lease obligations

(59)

(820)

Net cash provided by financing activities

72,050

49,982

Net increase in cash and cash equivalents

16,736

12,557

Cash and cash equivalents, at beginning of period

13,047

3,939

Cash and cash equivalents, at end of period

$
29,783

$
16,496

Supplemental disclosure of cash flow information

Cash paid during the period for interest

$
1,304

$
529


				Additional		Accumulated				Total		Series A
	Common Stock			Paid-In		Other		Accumulated		Stockholders'		Convertible
	Shares	Amount		Capital		Comprehensive Loss		Deficit		Deficit		Preferred Stock Temporary Equity
Three months ended March 31, 2021:
Balance, December 31, 2020	265,582		266		504,162		—		(648,511)		(144,083)	$	2,811
Issuance of convertible preferred stock, net	—										—		42,756
Conversion of preferred stock	54,166		54		45,513		—		—		45,567		(45,567)
Issuance of common stock, net	99,740		100		151,987						152,087		—
Exercise of stock options and ESPP purchases	3,439		3		1,696						1,699		—
Exchange and conversion of convertible notes, net	4,925		5		6,496						6,501		—
Stock-based compensation expense and vesting of RSU's	63		—		1,844						1,844		—
Net loss									(249,514)		(249,514)		—
Balance, March 31, 2021	427,915	$	428	$	711,698	$	—	$	(898,025)	$	(185,899)	$	—


Three months ended March 31, 2022:
Balance, December 31, 2021	447,282		447		765,215		(212)		(950,985)		(185,535)		—
Issuance of common stock	3,077		3		8,001		—		—		8,004		—
Exercise of stock options and warrants	9,084		9		162		—		—		171		—
Issuance of common stock for vested RSUs and ESPP purchase	3,786		4		58		—		—		62		—
Stock-based compensation expense	—		—		1,736		—		—		1,736		—
Net income	—		—		—		—		86,718		86,718		—
Other comprehensive loss	—		—		—		(625)		—		(625)		—
Balance, March 31, 2022	463,229	$	463	$	775,172	$	(837)	$	(864,267)	$	(89,469)	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Senseonics Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended
	March 31,
	2022		2021
Cash flows from operating activities
Net income (loss)	$	86,718		(249,514)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		263		316
Non-cash interest expense (debt discount and deferred costs)		2,772		972
Change in fair value of derivatives		(84,569)		180,899
(Gain) Loss on fair value adjustment of option		(21,701)		52,675
Gain on extinguishment of debt and option		—		(330)
Impairment of option, net		(30)		782
Stock-based compensation expense		1,736		1,740
Changes in assets and liabilities:
Accounts receivable		(2,056)		1,301
Prepaid expenses and other current assets		(1,411)		(677)
Inventory		(837)		(1,303)
Deposits and other assets		163		(30)
Accounts payable		886		(833)
Accrued expenses and other liabilities		(2,031)		(3,411)
Accrued interest		(62)		1,155
Net cash used in operating activities		(20,159)		(16,258)
Cash flows from investing activities
Capital expenditures		(137)		(11)
Proceeds from sale and maturity of marketable securities		19,803		—
Net cash provided by (used in) investing activities		19,666		(11)
Cash flows from financing activities
Issuance of common stock, net		8,004		152,087
Proceeds from exercise of stock options, stock warrants and ESPP purchases		233		1,804
Proceeds from issuance of Masters preferred stock, net		—		22,783
Repayment of term loans		(2,194)		—
Net cash provided by financing activities		6,043		176,674
Net increase in cash and cash equivalents		5,550		160,405
Cash and cash equivalents, at beginning of period		33,461		18,205
Cash and cash equivalents, at ending of period	$	39,011	$	178,610

Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	1,762	$	1,927
Supplemental disclosure of non-cash investing and financing activities
Issuance of common stock converted from preferred shares		—		54,166
Issuance of common stock converted from notes payables		—		4,925

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Senseonics Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~1.Organization~~

1.	Organization and Nature of Operations

Senseonics Holdings, Inc. ~~(the “Company”)~~, a Delaware corporation, is a medical technology company focused on the ~~design,~~ development and commercialization of long-term, implantable continuous glucose monitoring ~~products~~(“CGM”) systems to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy.

~~ASN Technologies, Inc. (“ASN”) was incorporated in Nevada on June 26, 2014. On December 4, 2015, ASN reincorporated in Delaware and changed its name to~~Senseonics, Incorporated is a wholly owned subsidiary of Senseonics Holdings, Inc. ~~On December 7, 2015, Senseonics Holdings, Inc. acquired 100% of the outstanding capital stock of Senseonics, Incorporated (the "Acquisition"). Senseonics, Incorporated~~and was originally incorporated on October 30, 1996 and commenced operations on January 15, 1997. Senseonics Holdings, Inc. and ~~its wholly-owned subsidiary~~ Senseonics, Incorporated are hereinafter collectively referred to as the “Company” unless otherwise indicated or the context ~~requires otherwise.~~otherwise requires.

2.	Liquidity and Capital Resources

~~2.Liquidity~~

~~The Company’s operations are subject~~From its founding in 1996 until 2010, the Company has devoted substantially all of its resources to ~~certain risks~~researching various sensor technologies and ~~uncertainties including, among others, current~~platforms. Beginning in 2010, the Company narrowed its focus to developing and ~~potential competitors with greater resources, lack of operating history and uncertainty of future profitability. Since inception,~~refining a commercially viable glucose monitoring system. However, to date, the Company has not generated any significant revenue from product sales. The Company has incurred substantial ~~operating~~ losses ~~principally~~and cumulative negative cash flows from ~~expenses associated with the Company’s research and development programs.~~operations since its inception in October 1996. The Company has ~~not generated significant revenues~~never been profitable from ~~the sale of products~~operations, and its ~~ability to generate revenue~~net losses were $302.5 million, $175.2 million, and ~~achieve profitability largely depends on the Company’s ability, alone or with others, to complete the development of its products or product candidates, and to obtain necessary regulatory approvals~~$115.5 million for the ~~manufacture, marketing~~years ended December 31, 2021, 2020 and ~~sales~~2019, respectively. As of ~~those products. These activities, including planned significant research and development efforts, will require significant uses~~March 31, 2022, the Company had an accumulated deficit of ~~working capital~~$864.3 million. To date, the Company has funded its operations principally through the ~~remainder~~issuance of ~~2017~~preferred stock, common stock, convertible notes and ~~beyond.~~

Ondebt. As of March ~~23, 2016,~~31, 2022, the Company effected the initial closing of its public offering of 15,800,000 shares of its common stock at a price to the public of $2.85 per share (the “March 2016 Offering”). Additionally, the Company closed on the partial exercise of the underwriters’ option to purchase additional shares on April 5, 2016. The Company received aggregate net proceeds from the March 2016 Offering of $44.8 million. On June 30, 2016, the Company entered into Amended and Restated Loan and Security Agreement with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) to potentially borrow up to an aggregate principal amount of $30.0 million. On June 1, 2017, the Company effected the closing of its offering of 29,078,014 shares of its common stock at a price of $1.41 per share (the “May 2017 Offering”). The Company received aggregate net proceeds from the May 2017 Offering of $40.4 million. On August 23, 2017, the Company effected the closing of its offering of 13,383,125 shares of its common stock at a price of $2.15 per share (the “August 2017 Offering”). The Company received aggregate net proceeds from the August 2017 Offering of $26.5 million. Management has concluded that, based on the Company’s current operating plans, its existinghad cash, cash equivalents and marketable securities ~~available~~of $166.9 million.

In November 2021, the Company entered into an Open Market Sale Agreement, (the “2021 Sales Agreement”) with Jefferies LLC (“Jefferies”), under which the Company could offer and sell, from time to time, at its sole discretion, shares of its common stock having an aggregate offering price of up to $150.0 million through Jefferies as its sales agent in an “at the market” offering. Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. During the three months ended March 31, 2022, the Company received $8.0 million in net proceeds from the sale of 3,077,493 shares of its common stock under the 2021 Sales Agreement.

In November 2019, the Company entered into an Open Market Sale Agreement (the “2019 Sales Agreement”) with Jefferies, under which the Company could offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $50.0 million through Jeffries as its sales agent in an “at the market” offering. In June 2021, the Company received $48.4 million in net proceeds from the sale of 12,830,333 shares of its common stock utilizing the full capacity under the 2019 Sales Agreement.

On January 21, 2021, the Company entered into an underwriting agreement, which was subsequently amended and restated on the same day (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC, as representative of the underwriters (the “Underwriters”), to issue and sell 51,948,052 shares of common stock, in an underwritten public offering pursuant to effective registration statements on Form S-3, including a related prospectus and prospectus supplement, in each case filed with the Securities and Exchange Commission (the “Offering”). The price to the public in the Offering was $1.925 per share of common stock. The Underwriters agreed to purchase the shares from the Company pursuant to the Underwriting Agreement at a price of $1.799875 per share and the Company also agreed to reimburse them for ~~sale will be sufficient~~customary fees and expenses. The initial closing of the Offering occurred on January 26, 2021. Subsequent to ~~meet~~the initial closing, the Underwriters exercised their option to purchase an additional 7,792,207 shares of common stock.

Total net proceeds from the Offering were $106.1 million after deducting underwriting discounts and commissions and estimated offering expenses.

Table of Contents

On January 17, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional purchasers (the “Purchasers”), pursuant to which the Company sold to the Purchasers, in a registered direct offering (the “Registered Direct Offering”), an aggregate of 40,000,000 shares (the “Shares”) of common stock, $0.001 par value per share. The Shares were sold at a purchase price of $1.25 per share for aggregate gross proceeds to the Company of $50.0 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. The Shares were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on November 27, 2019. The net proceeds to the Company from the Registered Direct Offering, after deducting fees and expenses and the estimated offering expenses payable by the Company, were approximately $46.1 million.

On November 9, 2020, the Company entered into an equity line agreement (the “Equity Line Agreement”) with Energy Capital, LLC, a Florida limited liability company (“Energy Capital”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital is committed to purchase up to an aggregate of $12.0 million of shares of the Company’s ~~anticipated operating needs~~newly designated series B convertible preferred stock (the “Series B Preferred Stock”) at the Company’s request from time to time during the 24-month term of the Equity Line Agreement. Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including the Company has less than $8 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), the Company has the right, at its sole discretion, to present Energy Capital with a purchase notice (each, a “Regular Purchase Notice”) directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of the Company’s Series B Preferred Stock at a per share price (the “Purchase Price”) equal to $1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the ~~third quarter~~date of ~~2018. Accordingly, since management has concluded~~its issuance, at a conversion price of $0.3951 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. The Equity Line Agreement provides that the Company ~~does~~shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less than $0.25 without the approval of Energy Capital. In addition, beginning on January 1, 2022, since there have ~~sufficient funds~~been 0 sales of the Series B Preferred Stock pursuant to ~~support operations through October 2018,~~Regular Purchases, Energy Capital has the right, at its sole discretion, by its delivery to the Company ~~believes that doubt about~~of a Regular Purchase Notice, to purchase up to the ~~Company’s ability~~$12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase Price. There have been no issuances of Series B Preferred Stock as of March 31, 2022.

On August 9, 2020, the Company entered into a financing agreement with the parent company of Ascensia Diabetes Care Holdings AG (“Ascensia”), PHC Holdings Corporation (“PHC”), pursuant to ~~continue~~which the Company issued $35.0 million in aggregate principal amount of Senior Secured Convertible Notes due on October 31, 2024 (the “PHC Notes”), to PHC. The Company also issued 2,941,176 shares of common stock to PHC as a ~~going concern exists.~~financing fee. The Company also has the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining approval for the 180-day Eversense product for marketing in the United States before such date.

~~Historically,~~Additionally, on August 9, 2020, the Company ~~has financed its operating activities through the sale of equity~~entered into a Stock Purchase Agreement with Masters Special Solutions, LLC and ~~equity linked securities and the issuance of debt. Although~~certain affiliates thereof (“Masters”), pursuant to which the Company ~~began generating revenue from product sales~~issued and sold to Masters 3,000 shares of ~~Eversense,~~convertible preferred stock, designated as Series A Preferred Stock (the “Series A Preferred Stock”), at a price of $1,000.00 per share in an initial closing. Masters also had the option to purchase up to an additional 27,000 shares of Series A Preferred Stock at a price of $1,000.00 per share in subsequent closings, subject to the terms and conditions of the Stock Purchase Agreement, as amended, through January 11, 2021. In January 2021, Masters and its ~~continuous glucose monitoring system,~~assignees purchased in ~~June 2016,~~aggregate an additional 22,783 shares of Series A Preferred Stock, resulting in additional gross proceeds to the Company ~~does not expect product revenues~~of $22.8 million. Each share of Series A Preferred Stock was initially convertible into a number of shares of common stock equal to ~~be sufficient~~$1,000.00 divided by the conversion price of $0.476 per share, subject to ~~satisfy its operating needs for several years, if ever. Accordingly,~~customary anti-dilution adjustments, including in the ~~Company plans~~event of any stock split. All shares of Series A Preferred Stock have been converted to continue financing its operations with external capital for the foreseeable future. However, the Company may not be able to raise additional funds on acceptable terms, or at all. If the Company is unable to secure sufficient capital to fund its research and development and other operating activities, the Company may be required to delay or suspend operations, enter into collaboration agreements with partners that could require the Company to share commercial rights to its products to a greater extent orcommon stock.

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3.	Summary of Significant Accounting Policies

~~at earlier stages in the product development process than is currently intended, merge or consolidate with other entities, or liquidate.~~

~~3.Summary of Significant Accounting Policies~~

Basis of Presentation

The accompanying unaudited ~~interim condensed~~ consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)~~. In~~ for interim financial information and the ~~Company’s opinion,~~instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Although the ~~accompanying~~Company considers the disclosures in these unaudited ~~interim condensed~~ consolidated financial statements ~~include all adjustments, consisting of normal recurring adjustments, which are necessary~~ to present fairly its financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2016, has been derived from audited financial statements as of that date. The interim condensed consolidated results of operations arebe adequate to make the information presented not ~~necessarily indicative of the results that may occur for the full fiscal year. Certain~~misleading, certain information ~~and~~or footnote ~~disclosure~~information normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted ~~pursuant to instructions,~~as permitted under the rules and regulations ~~prescribed by~~of the ~~U.S.~~United States Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position at March 31, 2022, and December 31, 2021, results of operations, comprehensive income (loss), and changes in stockholder’s deficit for the three months ended March 31, 2022, and 2021 and cash flows for the three months ended March 31, 2022, and 2021 have been included. The ~~Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these~~ unaudited ~~interim~~ condensed consolidated financial statements ~~are~~should be read in conjunction with ~~the audited financial statements and notes previously included in~~ the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021, as filed with the SEC on March 1, 2022. The interim results for March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any future interim periods.

The consolidated financial statements reflect the accounts of Senseonics Holdings, Inc. and its wholly owned operating subsidiary Senseonics, Incorporated.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of ~~revenues~~revenue and expenses during the reporting period. In the accompanying unaudited consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation allowances, derivative assets and liabilities, obsolete inventory, warranty obligations, variable consideration related to revenue, depreciable lives of property and equipment, and ~~estimated~~ accruals for clinical ~~and preclinical~~ study costs, which are accrued based on estimates of work performed under ~~contracts.~~contract. The Company considered COVID-19 related impacts to its estimates, as appropriate, within its unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods due to the uncertainties surrounding the severity and duration of the COVID-19 pandemic. Actual results could differ from those ~~estimates; however management does not believe that such differences would be material.~~estimates.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in ~~one~~1 segment, glucose monitoring products.

Comprehensive Loss

Comprehensive ~~Loss~~

~~Comprehensive loss~~income (loss) comprises of net ~~loss~~income (loss) and other changes in equity that are excluded from net ~~loss.~~income (loss). For the three ~~and nine~~ months ended ~~September 30, 2017 and 2016,~~March 31, 2022, the Company’s comprehensive income included $0.6 million of other comprehensive loss related to the unrealized loss on marketable securities. For the three months ended March 31, 2021, the Company’s net loss equaled its comprehensive ~~loss~~loss.

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Cash and ~~accordingly, no additional disclosure is presented.~~

Cash Equivalents

The Company considers highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.

~~Marketable Securities~~

~~Marketable securities consist of government~~ Cash and agency securities and corporate debt securities. The Company’s investments are classified as available for sale. Such securities are carried at fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in consolidated results of

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operations. A decline in the market value of any available for sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income is recognized when earned. The cost of securities sold is calculated using the specific identification method. The Company classifies all available-for-sale marketable securities with maturities greater than one year from the balance sheet date as non-current assets.

~~Inventory~~

Inventory is valued at the lower of cost or market (net realizable value). Cost is determined using the standard cost method that approximates first in, first out. The Company periodically reviews inventory to determine if a write down is necessary for inventory that has become obsolete, inventory that has a cost basis less than net realizable value, and inventory in excess of future demand taking into consideration the product shelf life.

~~Accounts Receivable~~

The Company grants credit to various customers in the normal course of business. Accounts receivable consist of amounts due from distributors. The Company records an allowance for doubtful accounts at the time potential collection risk is identified. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

~~Property and Equipment~~

Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally five years. Equipment under capital leases is depreciated on a straight-line basis over the lesser of its estimated useful life or the lease term. Leasehold improvements are depreciated over the shortercash equivalents consisted of the ~~remaining lease term or useful lives~~following as of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statements of operations and comprehensive loss.dates set forth below (in thousands):


	March 31,		December 31,
	2022		2021
Cash ⁽¹⁾	$	1,338	$	4,264
Money market funds		37,673		29,197
Cash and cash equivalents	$	39,011	$	33,461

(1)	Includes overnight repurchase agreements

Long-lived Assets

Management reviews long-lived assets, including property and equipment and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If the undiscounted cash flows are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. There was 0 impairment recorded for the three months ended March 31, 2022. Management ~~did not identify any indicators~~identified an indicator of impairment ~~through September 30, 2017.~~for a right of use asset and recorded an immaterial expense for the three months ended March 31, 2021.

Warranty Obligation

~~Warranty Reserve~~

The Company provides a warranty of one year on its smart transmitters. Additionally, the Company may also replace Eversense system components that do not function in accordance with the product specifications. Estimated replacement costs ~~associated with a product~~ are recorded at the time of ~~shipment. The Company estimates future replacement costs~~shipment as a charge to cost of sales in the consolidated statement of operations and are developed by analyzing product performance data and historical replacement experience, including comparing actual replacements to revenue.

At March 31, 2022, and December 31, 2021, the warranty reserve was $0.8 million and $0.7 million, respectively. The following table provides a reconciliation of the change in estimated warranty liabilities for the ~~timing~~three months ended March 31, 2022 and ~~amount of returned~~for the twelve months ended December 31, 2021 (in thousands):


	March 31,		December 31,
	2022		2021
Balance at beginning of the period	$	723	$	646
Provision for warranties during the period		58		781
Settlements made during the period		(3)		(704)
Balance at end of the period	$	778	$	723

Revenue Recognition

The Company generates product ~~and the Company evaluates the reserve quarterly and makes adjustments when appropriate.~~

~~Revenue Recognition~~

~~Revenue is generated~~revenue from sales of ~~sensor kits, transmitter kits,~~the Eversense system and related components and supplies ~~under agreements for~~to Ascensia, through a collaboration and commercialization agreement (the “Commercialization Agreement”), third-party distributors ~~that~~in the European Union and to strategic fulfillment partners in the United States (collectively, “Customers”), who then resell the ~~product~~products to ~~customers.~~health care providers and patients. The Company is paid for its sales directly ~~by third-party distributors,~~to the Customers, regardless of whether or not the ~~distributors~~Customers resell the products to ~~their customers.~~health care providers and patients.

~~The Company recognizes~~10

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Revenue from product sales ~~revenue~~is recognized at a point in time when ~~all~~the Customers obtain control of the ~~following criteria are met:~~

~~persuasive evidence of an arrangement exists;~~

~~delivery has occurred;~~

Company’s product based upon the delivery terms as defined in the contract at an amount that reflects the consideration which the ~~price is fixed or determinable; and~~

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~~collectability is reasonably assured.~~

~~The~~ Company ~~offers no rights of return and has no significant post-delivery obligations and therefore, the above criteria are generally met as products are shipped~~expects to ~~or received by, third-party distributors.~~

~~Research and Development Costs~~

Research and development costs are expensed as incurred. Research and development expenses include costs related to employee compensation, preclinical studies and clinical trials, supplies, outsource testing, consulting and depreciation and other facilities‑related expenses.

~~Stock‑Based Compensation~~

~~The Company recognizes the cost of employee services received~~receive in exchange for ~~awards~~the product. Contracts with the Company’s distributors contain performance obligations, mostly for the supply of ~~equity instruments,~~goods, and is typically satisfied upon transfer of control of the product. Customer contracts do not include the right to return unless there is a product issue, in which case the Company may provide replacement product. Product conformity guarantees do not create additional performance obligations and are accounted for as warranty obligations in accordance with guarantee and loss contingency accounting guidance.

The Company’s contracts may contain some form of variable consideration such as ~~stock options,~~prompt-pay discounts, tier-volume price discounts and for the Ascensia commercial agreement, revenue share. Variable consideration, such as discounts and prompt-pay incentives, are treated as a reduction in revenue and variable consideration, such as revenue share, is treated as an addition in revenue when the product sale is recognized. The amount of variable consideration that is included in the transaction price may be constrained and is included in revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period, when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint requires the use of management judgment. Depending on the variable consideration, the Company develops estimates for the expected value based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight‑line basis over the requisite service period for each separately vesting portionterms of the ~~award~~agreements, historical data, geographic mix, reimbursement rates, Ascensia’s ability to sell through the inventory and market conditions.

Contract assets consist of unbilled receivables from customers and are recorded at net realizable value and relate to the revenue share variable consideration from the Ascensia commercial agreement.

Concentration of Revenue and Customers

For the three months ended March 31, 2022 and 2021, the Company derived 88% and 81%, respectively, of its total revenue from 1 customer, Ascensia. Revenues for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.these corresponding periods represent purchases for sensors, transmitters and miscellaneous Eversense system components.

Revenue by Geographic Region

The ~~Company uses~~following table sets forth net revenue derived from the ~~Black‑Scholes option pricing model to determine~~Company’s 2 primary geographical markets, the ~~fair value of stock‑option awards. Valuation of stock awards requires management to make assumptions~~United States and ~~to apply judgment to determine the fair value~~outside of the awards. These assumptions and judgments include estimating the fair value of the Company’s common stock, future volatility of the Company’s stock price, dividend yields, future employee turnover rates, and future employee stock option exercise behaviors. Changes in these assumptions can affect the fair value estimate.

Under Accounting Standards Codification (“ASC”) 718, the cumulative amount of compensation cost recognized for instruments classified as equity that ordinarily would result in a future tax deduction under existing tax law shall be considered to be a deductible difference in applying ASC 740, ~~Income Taxes. The deductible temporary difference is~~United States, based on the ~~compensation cost recognized for financial reporting purposes; however, these provisions currently do not impact~~geographic location to which the Company ~~as all~~delivers the ~~deferred tax assets have a full valuation allowance.~~product, for the three months ended March 31, 2022 and 2021:


	March 31, 2022				March 31, 2021
			%				%
(Dollars in thousands)	Amount		of Total		Amount		of Total
Revenue, net:
Outside of the United States	$	1,714	69.1	%	$	2,533	89.0	%
United States		767	30.9			313	11.0
Total	$	2,481	100.0	%	$	2,846	100.0	%

Marketable Securities

~~Since~~Marketable securities consist of commercial paper, corporate debt securities, asset backed securities and government and agency securities. The Company’s investments are classified as available for sale. Such securities are carried at fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated other comprehensive income or loss. Realized gains and losses and declines in value judged to be other-than-temporary, if any, are included in consolidated results of operations. A decline in the ~~Company had net operating loss (“NOL”) carryforwards as~~market value of ~~September 30, 2017, no excess tax benefits~~any available for sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that period, and a new cost basis for the ~~tax deductions related to stock-based awards were~~security is established. Dividend and interest income is recognized inwhen earned. The cost of securities sold is calculated using the ~~statements of operations and comprehensive loss.~~

~~Income Taxes~~

specific identification method. The Company ~~uses~~classifies all available-for-sale marketable securities with maturities greater than one year from the ~~asset~~balance sheet date as non-current assets. The Company does not generally intend to sell these investments, and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax ratesit is ~~recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is~~not more likely than not that ~~some portion or all~~the Company will be required to sell the investments before recovery of ~~the deferred tax asset will not be realized.~~

Management uses a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In the ordinary course of business, transactions occur fortheir amortized cost bases, which ~~the ultimate outcome~~ may be ~~uncertain. Management~~at maturity.

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Accounts Receivable

Accounts receivable consist of amounts due from the Company’s Customers and are recorded at net realizable value, which may include reductions for allowances for doubtful accounts at the time potential collection risk is identified or for promotional or prompt-pay discounts offered. The Company does not ~~expect the outcome related to accrued uncertain tax provisions to~~ have a ~~material adverse effect on the Company’s financial position, results~~history of ~~operations or cash flows. The Company recognizes interest~~collectability concerns and ~~penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company did not have any amounts accrued relating to interest and penalties~~0 allowance for uncollectible accounts was recorded as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~

~~Table~~2021. Accounts receivable as of ~~Contents~~

March 31, 2022 and December 31, 2021 included unbilled accounts receivable of $0.7 million and $1.8 million, respectively. The Company ~~is subject~~expects to ~~taxation in various jurisdictions in the United States~~invoice and ~~remains subject to examination by taxing jurisdictions for the year 1998 and~~collect all subsequent periods due to the availability of NOL carryforwards. In addition, all of the NOLs and research and development credit carryforwards that may be used in future years are still subject to adjustment.

~~Fair Value of Financial Instruments~~

~~The carrying amounts of cash and cash equivalents,~~unbilled accounts receivable ~~accounts payable,~~within 12 months.

Net Income (Loss) per Share

Basic net income per share attributable to common stockholders is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, accrued expenses approximate fair value because of their short maturities. Based on the borrowing rates currently available for loans with similar terms, the Company believes that the fair value of its long-term notes payable approximates its carrying value.

~~Net Loss per Share~~

when dilutive, potential common share equivalents. Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

~~For~~Potentially dilutive common shares consist of shares issuable from restricted stock units, warrants and the Company’s convertible notes. Potentially dilutive common shares issuable upon vesting of restricted stock units and exercise of stock options and warrants are determined using the average share price for each period under the treasury stock method. Potentially dilutive common shares issuable upon conversion of the Company’s convertible notes are determined using the if converted method. In periods of net loss, all potentially dilutive common shares are excluded from the computation of the diluted net loss per share ~~is calculated similarly to basic loss per share because~~for those periods, as the ~~impact of all potential dilutive common shares is anti‑dilutive.~~ effect would be anti-dilutive.

The ~~total number of anti‑dilutive shares, which have been excluded from~~following table sets forth the computation of basic and diluted ~~loss~~net income per share ~~was 15,986,298~~for the periods shown:


	Three Months Ended March 31,
	2022	2021

Net income (loss)	86,718	(249,514)
Impact of conversion of dilutive securities	(104,575)	-


Dilutive Net income (loss)	(17,857)	(249,514)

Net income (loss) per share
Basic	0.19	(0.68)
Diluted	(0.03)	(0.68)

Basic weighted average shares outstanding	455,942,886	364,274,433
Dilutive potential common stock outstanding
Stock-based awards	8,982,055	-
2023 Notes	4,617,646	-
2025 Notes	39,689,142	-
PHC Notes	65,151,893	-
Energy Capital Option	25,129,298	-
Warrants	5,685,919	-
Diluted weighted average shares outstanding	605,198,839	364,274,433

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For the three months ended March 31, 2021, the Company operated at a loss. Accordingly, all potentially dilutive shares were considered antidilutive, and ~~11,484,459 common stock options~~basic and ~~4,570,902~~ ~~and 5,127,176~~ ~~stock purchase warrants exercisable for common stock as of September 30, 2017 and 2016, respectively.~~diluted EPS are the same.

~~For periods of~~Outstanding anti-dilutive securities not included in the diluted net income per share attributable to common stockholders calculations were as follows:


	Three Months Ended March 31,
	2022	2021
Stock-based awards	9,877,143	29,827,858
2023 Notes	—	5,224,594
2025 Notes	—	39,689,142
PHC Notes	—	65,757,177
PHC Option	24,959,156	—
Warrants	179,606	13,532,533
Total anti-dilutive shares outstanding	35,015,905	154,031,304

Recent Accounting Pronouncements

Recently Adopted

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and ~~when~~Other Options (Subtopic 470-20) and Derivatives and Hedging—Contract in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). This new guidance is intended to reduce the ~~effects~~complexity of accounting for convertible instruments. The guidance also addresses how convertible instruments are ~~not anti-dilutive,~~accounted for in the diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock optionscalculation and ~~stock purchase warrants using the treasury stock method.~~

~~Recent Accounting Pronouncements~~

~~Recently Adopted~~

~~In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-11, which~~ requires that inventory accounted for under the first-in, first-out or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted the guidance in the first quarter of fiscal year 2017. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

~~Not Yet Adopted~~

In May 2014, the FASB issued ASU 2014-09, guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures ~~regarding~~about the ~~nature, amount, timing, and uncertainty~~terms of revenue arising from contracts with customers. In August 2015, the FASB issued guidance approving a one-year deferral, making the standard effective for reporting periods beginning after December 15, 2017, with early adoption permitted only for reporting periods beginning after December 15, 2016. In March 2016, the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross rather than net, with the same deferred effective date. In April 2016, the FASB issued guidance to clarify the implementation guidance on identifying performance obligations and the accounting for licensesconvertible instruments. Entities may adopt ASU 2020-06 using either partial retrospective or fully retrospective method of intellectual property, with the same deferred effective date. In May 2016, the FASB issued guidance rescinding SEC paragraphs related to revenue recognition, pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting. In May 2016, the FASB also issued guidance to clarify the

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implementation guidance on assessing collectability, presentation of sales tax, noncash consideration, and contracts and contract modifications at transition, with the same effective date. The Company is currently analyzing the effect of the standard by reviewing the current accounting policy and practices to identify potential differences which would result from applying the requirements of the new standard to its revenue contracts. The Company has identified only one revenue stream, completed the contract reviews and is nearing the completion of its assessment of all potential effects of the standard. The Company plans to adopt the guidance on January 1, 2018 using the full retrospective method.

~~In February 2016, the FASB issued~~transition. ASU 2016-02, guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities related to long-term leases on the balance sheet and expands disclosure requirements regarding leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The guidance must be adopted on a modified retrospective basis and provides for certain practical expedients. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-015, guidance on the classification of certain cash receipts and cash payments in the statements of cash flows, including those related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investees. The guidance2020-06 is effective for public business entities for fiscal years beginning after December 15, ~~2017, and for~~2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The guidance must be adopted on a retrospective basis and must be applied to all periods presented, but may be applied prospectively if retrospective application would be impracticable. The Company is currently evaluating the impact of adopting the guidance will have on its consolidated statements of cash flows.

The Company has ~~evaluated all other issued unadopted Accounting Standards Updates~~adopted this guidance as of January 1, 2022 and ~~believes the~~its adoption ~~of these standards will~~did not have a material impact on the consolidated financial statements and related disclosures.

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The Company currently holds investments in available-for-sale securities. The Company has not historically experienced collection issues or bad debts with trade receivables. Accordingly, the Company does not expect this to have a significant impact on its consolidated financial statements and related disclosures at this time. Since the Company qualified as a smaller reporting company as of ~~earnings, balance sheets, or cash flows.~~June 28, 2019, it maintains its status as a smaller reporting company for the adoption of this standard. As such, the Company will adopt this guidance on the effective date for smaller reporting companies, January 1, 2023.

~~4. Marketable Securities~~Table of Contents

4.	Marketable Securities

Marketable securities available for sale, ~~consisting of government and agency securities and corporate debt securities,~~ were as follows (in thousands):


	September 30, 2017
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value

									March 31, 2022
											Gross		Gross		Estimated
									Amortized		Unrealized		Unrealized		Market
									Cost		Gains		Losses		Value
Commercial Paper									$	43,796		—		—	$	43,796
Corporate debt securities									$	31,318		—		(307)	$	31,011
Asset backed securities									$	18,996		—		(88)	$	18,908
Government and agency securities	$	3,982	$		$		$	3,982	$	34,627		—		(442)	$	34,185
Corporate debt securities		18,935						18,935
Total	$	22,917	$	—	$	—	$	22,917	$	128,737	$	—	$	(837)	$	127,900


	December 31, 2016
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value

									December 31, 2021
											Gross		Gross		Estimated
									Amortized		Unrealized		Unrealized		Market
									Cost		Gains		Losses		Value
Commercial Paper									$	57,369		—		—	$	57,369
Corporate debt securities									$	39,825		—		(77)	$	39,748
Asset backed securities									$	26,736		—		(29)	$	26,707
Government and agency securities	$	1,201	$	—	$	—	$	1,201	$	24,609		—		(106)	$	24,503
Corporate debt securities		6,090		—		—		6,090
Total	$	7,291	$	—	$	—	$	7,291	$	148,539	$	—	$	(212)	$	148,327

The following are the scheduled maturities as of March 31, 2022 (in thousands):


2022 (remaining nine months)	$	77,905
2023		45,372
2024		2,445
Thereafter		3,015
Total	$	128,737

~~Table~~The Company periodically reviews its portfolio of ~~Contents~~

debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, the Company assesses at the individual security level, for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on available-for-sale securities at March 31, 2022 were not significant and were primarily due to changes in interest rates and not due to increased credit risk associated with specific securities. The Company does not intend to sell these impaired investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

5. Inventory, net

Inventory, net of reserves, consisted of the following (in thousands):


	March 31,		December 31,
	2022		2021
Finished goods	$	1,203	$	1,012
Work-in-process		4,381		3,770
Raw materials		1,569		1,534
Total	$	7,153	$	6,316

September 30,

December 31,

2017

2016
Finished goods

$
523

$
477
Work-in-process

1,981

—
Raw materials

117

—
Reserve for lower of cost or net realizable value

(208)

—
Total

$
2,413

$
477

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The Company charged less than $0.1 million to cost of sales for the three months ended March 31, 2022 to reduce the value of inventory for items that are potentially obsolete due to expiry, in excess of product demand, or to adjust costs to their net realizable value. There was 0 corresponding charge for the three months ended March 31, 2021.

~~6.Accrued~~6. Prepaid Expenses and Other Current ~~Liabilities~~Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	March 31,		December 31,
	2022		2021
Contract manufacturing⁽¹⁾	$	5,016	$	5,036
Insurance		1,404		74
Clinical and Preclinical		467		142
Interest receivable		338		443
IT and software		180		225
Other		119		193
Rent		105		105
Total prepaid expenses and other current assets	$	7,629	$	6,218

(1)

Includes deposits to contract manufacturers for manufacturing process.

7.	Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

September 30,

December 31,

2017

2016

Clinical and preclinical

$
510

$
500

Contract manufacturing

2,304

1,328

Compensation and benefits

1,754

1,774

Legal

235

314

Audit and tax related

217

320

Other

394

244

Total accrued expenses

5,414

4,480

Accrued purchases

1,541

—

Equipment lease, current portion

40

79

Compensation and benefits

38

29

Product warranty

457

78

Other

64

—

Total accrued expenses and other current liabilities

$
7,554

$
4,666


	March 31,		December 31,
	2022		2021
Compensation and benefits	$	1,811	$	3,484
Research and development		1,781		2,145
Interest on notes payable		2,083		2,144
Sales and marketing services		2,078		1,962
Product warranty and replacement obligations		1,753		1,697
Professional and administration services		1,039		1,011
Operating lease		981		904
Contract manufacturing		727		914
Other		163		3
Total accrued expenses and other current liabilities	$	12,416	$	14,264

~~7.Commitments and Contingencies~~

8.	Notes Payable, Preferred Stock and Stock Purchase Warrants

Term Loans

The Company leases approximately 32,000 square feet of research and office space under a non‑cancelable operating lease expiring in 2023. The Company has an option to renew the lease for one additional five‑year term. Expense recognition is based upon a straight‑line basis and was $155,884 and $149,427 for the three months ended September 30, 2017 and 2016, respectively, and $467,653 and $376,651 for the nine months ended September 30, 2017 and 2016, respectively.

PPP Loan

On ~~March 31, 2016,~~April 22, 2020, the Company ~~amended a corporate development agreement with a supplier to include a minimum purchase commitment per year. Total research and development expense related~~received $5.8 million in loan funding from the PPP pursuant to the minimum payment was $242,372 and $291,000 for the three months ended September 30, 2017 and 2016, respectively, and $767,993 and $544,890 for the nine months ended September 30, 2017 and 2016, respectively. There were approximately $1.6 million of future minimum payments under this commitment at September 30, 2017.

8.~~401(k) Plan~~

The Company has a defined contribution 401(k) plan available to all full-time employees. Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal income tax regulations. Participants are fully vested in their contributions. There have been no employer contributions to this plan. Administrative expenses for the plan, which are paidCARES Act, as amended by the ~~Company, were not material~~Flexibility Act, and administered by the Small Business Administration (“SBA”). The unsecured loan (the “PPP Loan”) is evidenced by the PPP Note dated April 21, 2020 (the “PPP Note”) in the ~~three and nine months ended September 30, 2017.~~

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~~9.Notes Payable~~

~~Term Notes Payable~~

On June 30, 2016, the Company entered into an Amended and Restated Loan and Security Agreement with Oxford and SVB (the “Lenders”). Pursuant to the Amended and Restated Loan and Security Agreement, the Company may potentially borrow up to an aggregate principal amount of ~~$30.0~~$5.8 million with Silicon Valley Bank (“SVB”).

Under the terms of the PPP Note and the PPP Loan, interest accrues on the outstanding principal at a rate of 1.0% per annum. The term of the PPP Note is two years, though it may be payable sooner in connection with an event of default under the following four tranches: $15.0 million (“Tranche 1 Term Loan”); $5.0 million (“Tranche 2 Term Loan”); $5.0 million (“Tranche 3 Term Loan”); and $5.0 million (“Tranche 4 Term Loan”) (each, a “Term Loan,” and collectively, the “Term Loans”). The funding conditions for the Tranche 1 Term Loan were satisfied as of June 30, 2016. Therefore, the Company issued secured notes to the Lenders for aggregate gross proceeds of $15.0 million (the “Notes”) on June 30, 2016.PPP Note. The Company ~~used approximately $11.0 million from the proceeds from the Notes~~began to repay the outstanding balance under the Company’s previously existing Loan and Security Agreement with Oxford, dated as of July 31, 2014, including the applicable final payment fee due thereunder of $1 million. The Company borrowed the Tranche 2 Term Loan in November 2016 upon the Lenders’ confirmation that the Company received positive data in its U.S. pivotal trial of Eversense, and the Company submitted a pre-market approval (“PMA”) application for Eversense in the United States with the FDA. The Company borrowed the Tranche 3 Term Loan in March 2017 upon completion of the first commercial sale of its second-generation transmitter in the European Union. The Company may borrow the Tranche 4 Term Loan on or before December 31, 2017 if it receives PMA approval from the FDA for Eversense, and achieves trailing six-month revenue for the applicable period of measurement of at least $4.0 million. The maturity date for all Term Loans is June 1, 2020 (the “Maturity Date”).

The Term Loans bear interest at a floating annual rate of 6.31% plus the greater of (i) 90-day U.S. Dollar LIBOR reported in the Wall Street Journal or (ii) 0.64%, provided that the minimum floor interest rate is 6.95%, and requiremake equal monthly ~~payments. The monthly payments initially consist of interest-only. After 18 months, the monthly payments will convert to~~ payments of principal and ~~monthly~~interest, beginning in the third quarter of 2021. As of March 31, 2022, the outstanding balance, including accrued interest, ~~with the principal amount being amortized over the ensuing 30 months.~~

~~The Company may elect to prepay all Term Loans prior to the Maturity Date subject to a prepayment fee equal to 3.00% if the prepayment occurs within one year~~ of the ~~funding date~~PPP Note was $0.7 million.

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The PPP Note may be prepaid in part or in full, at any Term Loan, 2.00% if the prepayment occurs during the second year following the funding date of any Term Loan, and 1.00% if the prepayment occurs more than two years after the funding date of any Term Loan and prior to the Maturity Date.

time, without penalty. The ~~Amended and Restated Loan and Security Agreement contains~~PPP Note provides for certain customary events of default, including ~~bankruptcy,~~(i) failing to make a payment when due under the PPP Note, (ii) failure to do anything required by the PPP Note or any other loan document, (iii) defaults of any other loan with SVB, (iv) failure to disclose any material fact or make ~~payments~~a materially false or misleading representation to SVB or SBA, (v) default on any loan or agreement with another creditor, if SVB believes the default may materially affect the Company’s ability to pay the PPP Note, (vi) failure to pay any taxes when due, (vii) becoming the ~~occurrence~~subject of a ~~material impairment on~~proceeding under any bankruptcy or insolvency law, having a receiver or liquidator appointed for any part of the ~~Lenders’ security interest over~~Company’s business or property, or making an assignment for the ~~collateral, a material~~benefit of creditors, (viii) having any adverse change in financial condition or business operation that the ~~occurrence~~SVB believes may materially affect the Company’s ability to pay the PPP Note, (ix) if the Company reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the SVB’s prior written consent, or (x) becoming the subject of a ~~default under certain other agreements entered into by~~civil or criminal action that SVB believes may materially affect the ~~Company,~~Company’s ability to pay the rendering of certain types of judgments against the Company, the revocation of certain government approvals of the Company, violation of covenants, and incorrectness of representations and warranties in any material respect.PPP Note. Upon the occurrence of an event of default, ~~subject to specified cure periods,~~SVB has customary remedies and may, among other things, require immediate payment of all amounts owed byunder the PPP Note, collect all amounts owing from the Company, ~~would begin~~and file suit and obtain judgment against the Company.

Convertible Preferred Stock and Warrants

On November 9, 2020, the Company entered into the Equity Line Agreement with Energy Capital, LLC, which provides that, upon the terms and subject to ~~bear interest~~the conditions and limitations set forth therein, Energy Capital is committed to purchase up to an aggregate of $12.0 million of shares of the Company’s Series B Preferred Stock at the Company’s request from time to time during the 24-month term of the Equity Line Agreement. Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including the Company having less than $8 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), the Company has the right, at sole discretion, to present Energy Capital with a Regular Purchase Notice directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a ~~rate that is 5.00% above~~price of $1,000.00 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of the ~~rate effective immediately before~~Company’s Series B Preferred Stock at the Purchase Price equal to $1,000.00 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of $0.3951 per share, subject to customary anti-dilution adjustments, including in the event of ~~default, and may be declared immediately due and payable~~any stock split. The Equity Line Agreement provides that the Company shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less than $0.25 without the approval of Energy Capital. In addition, beginning on January 1, 2022, since there have been 0 sales of the Series B Preferred Stock pursuant to Regular Purchases, Energy Capital has the right, at its sole discretion, by ~~Lenders.~~

~~Pursuant~~its delivery to the ~~Amended~~Company of a Regular Purchase Notice, to purchase up to the $12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase Price. There have been no issuances of Series B Preferred Stock as of March 31, 2022.

The Company accounted for the Equity Line Agreement as a put/call option (the “Energy Capital Option”). This put/call option is classified as a liability in accordance with ASC 480, Distinguishing liabilities from equity, on the Company’s balance sheet and ~~Restated Loan and Security~~was recorded at the estimated fair value of $4.2 million upon issuance. The put/call option is required to be remeasured to fair value at each reporting period with the change recorded in change in fair value of derivatives that is a component of other income (expense). In connection with the issuance of the Equity Line Agreement, the Company ~~also~~incurred $7.6 million in debt issuance costs in fiscal year 2020. The fair value as of March 31, 2022 and December 31, 2021 was $47.7 million and $69.4 million, respectively.

Concurrently with entry into the Equity Line Agreement, the Company issued ~~10-year stock purchase warrants~~a warrant to Energy Capital, exercisable beginning May 9, 2021, to purchase ~~an aggregate of 116,581, 63,025 and 80,645~~up to 10,000,000 shares of common stock at an exercise price of ~~$3.86, $2.38 and $1.86~~$0.3951 per share ~~respectively (see~~(the “Warrant”). The Warrant was exercised in full in February 2022.

On August 9, 2020, the Company entered into a Stock Purchase Agreement with Masters, pursuant to which the Company issued and sold to Masters 3,000 shares of Series A Preferred Stock, at a price of $1,000.00 per share in an initial closing. Masters also had the option to purchase up to an additional 27,000 shares of Series A Preferred Stock at a price of $1,000.00 per share in subsequent closings, subject to the terms and conditions of the Stock Purchase

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Agreement, as amended, through January 11, 2021. In January 2021, Masters and its assignees purchased in aggregate an additional 22,783 shares of Series A Preferred Stock, resulting in additional gross proceeds of $22.8 million. Each share of Series A Preferred Stock was initially convertible into a number of shares of common stock equal to $1,000.00 divided by the conversion price of $0.476 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. All 25,783 shares of Series A Preferred Stock have been converted to common stock. Masters’ option to purchase the remaining unissued shares of Series A Preferred Stock expired on January 11, 2021, resulting in a gain on extinguishment of $3.5 million.

Convertible Notes

Exchange Agreement with Highbridge

On April 21, 2020, the Company entered into a Note ~~10)~~Purchase and Exchange Agreement with certain funds managed by Highbridge providing for the exchange of $24.0 million aggregate principal amount of the Company’s outstanding 2025 Notes for (i) $15.7 million aggregate principal amount of newly issued Second Lien Notes (the “Second Lien Notes”), (ii) 11,026,086 shares of common stock, (iii) warrants to purchase up to 4,500,000 shares of common stock at an exercise price of $0.66 per share, and (iv) $0.3 million in accrued and unpaid interest on the 2025 Notes being exchanged (the “Exchange”). The Exchange closed on April 24, 2020. During 2020, Highbridge voluntarily converted all $15.7 million of outstanding principal amount of the Second Lien Notes for 42,776,936 shares of the Company’s common stock.

PHC Notes

On August 9, 2020, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with PHC, as the purchaser (together with the other purchasers from time to time party thereto, the “Note Purchasers”) and Alter Domus (US) LLC, as collateral agent. Pursuant to the Note Purchase Agreement, the Company borrowed $35.0 million in aggregate principal through the issuance and sale of the PHC Notes on August 14, 2020 (the “Closing Date”). The Company also issued 2,941,176 shares of its common stock, $0.001 par value per share to PHC as a financing fee (the “Financing Fee Shares”) on the Closing Date. The Financing Fee Shares are accounted for as debt discount in the amount of $1.5 million.

The PHC Notes are ~~collateralized~~senior secured obligations of the Company and will be guaranteed on a senior secured basis by the Company’s wholly owned subsidiary, Senseonics, Incorporated. Interest at the initial annual rate of 9.5% is payable semi-annually in cash or, at the Company’s option, payment in kind. The interest rate decreased to 8.0% in April 2022 as a result of the Company having obtained FDA approval for the 180-day Eversense E3 system for marketing in the United States. The maturity date for the PHC Notes is October 31, 2024 (the “Maturity Date”). The obligations under the PHC Notes are secured by substantially all of the Company’s ~~consolidated assets other than~~and its ~~intellectual property.~~ subsidiary’s assets.

The Note Purchasers are entitled to convert the PHC Notes ~~also contain certain restrictive covenants that limit~~to common stock at a conversion rate of 1,867.4136 shares per $1,000 principal amount of the PHC Notes (including any interest added thereto as payment in kind), equivalent to a conversion price of approximately $0.54 per share, subject to specified anti-dilution adjustments, including adjustments for the Company’s ~~ability~~issuance of equity securities on or prior to ~~incur additional~~April 30, 2022 below the conversion price. In addition, following a notice of redemption or certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its PHC Notes in connection with such notice of redemption or corporate event. In certain circumstances, the Company will be required to pay cash in lieu of delivering make whole shares unless the Company obtains stockholder approval to issue such shares.

Subject to specified conditions, on or after October 31, 2022, the PHC Notes are redeemable by the Company if the closing sale price of the common stock exceeds 275% of the conversion price for a specified period of time and subject to certain conditions upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount (including any payment in kind interest which has been added to such amount), plus any accrued but unpaid interest. On or after October 31, 2023, the PHC Notes are redeemable by the Company upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount (including any payment in kind interest which has been added to such amount), plus any accrued but unpaid interest, plus a call premium of 130% if redeemed at

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least six months prior to the Maturity Date or a call premium of 125% if redeemed within six months of the Maturity Date.

The Note Purchase Agreement contains customary terms and covenants, including financial covenants, such as operating within an approved budget and achieving minimum revenue and liquidity targets, and negative covenants, such as limitations on indebtedness, liens, mergers, asset transfers, certain investing activities and ~~liens, merge with~~ other ~~companies or consummate~~matters customarily restricted in such agreements. Most of these restrictions are subject to certain minimum thresholds and exceptions. The Note Purchase Agreement also contains customary events of default, after which the PHC Notes become due and payable immediately, including defaults related to payment compliance, material inaccuracy of representations and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, cross defaults to certain other agreements, judgments against the Company, change of control ~~acquire other companies, engage in new lines~~or delisting events, termination of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions, as well as financial reporting requirements. any guaranty, governmental approvals, and lien priority.

The Company also has the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022 (the “PHC Option”), contingent upon obtaining approval for the 180-day Eversense product for marketing in the United States before such date. The PHC Option represents a freestanding financial instrument and is recognized as an asset in the Company’s consolidated balance sheets at fair value on the date of issuance and subject to impairment testing in each reporting period prior to the options exercise or expiration. The Company acknowledges that while the PHC Option is subject to impairment testing, there is no explicit guidance regarding how impairment should be assessed and measured for the PHC Option. As such, the measurement alternative in ASC Topic 321, Investments—Equity Securities, for equity securities without readily determinable fair values can be applied by analogy to assess and measure impairment of the PHC Option. The Company developed an estimated fair value at March 31, 2022 and December 31, 2021 to be $0.3 million and $0.2 million, respectively, and a gain of less than $0.1 million was recognized in net income as the difference between the fair value of the investment and its carrying amount for the three months ended March 31, 2022

The Note Purchase Agreement also contained several provisions requiring bifurcation as a separate derivative liability including an embedded conversion feature, mandatory prepayment upon event of default that constitutes a breach of the minimum revenue financial covenant, optional redemption upon an event of default, change in interest rate after PMA approval and default interest upon an event of default. The Company recorded the fair value of the embedded features in the amount of $25.8 million as a derivative liability in the Company’s consolidated balance sheets in accordance with ASC Topic 815, Derivatives and Hedging. The derivative is adjusted to fair value at each reporting period, with the change in the fair value recorded in change in fair value of derivatives that is a component of other income (expense) in the Company’s consolidated statement of operations and comprehensive loss. The fair value of the derivative at March 31, 2022 and December 31, 2021 was $104.0 million and $149.1 million, respectively.

In connection with the issuance of the Note Purchase Agreement, the Company incurred $2.9 million in debt issuance costs ~~related to~~and debt discounts. The associated debt issuance costs were recorded as a contra liability in the ~~Notes~~amount of ~~approximately $568,648 that~~$1.4 million and are ~~being~~deferred and amortized as additional interest expense over the term of the notes.

2025 Notes

In July 2019, the Company issued $82.0 million in aggregate principal amount of senior convertible notes that will mature on January 15, 2025 (the “2025 Notes”), unless earlier repurchased or converted. The 2025 Notes ~~using~~are convertible, at the ~~effective interest method.~~option of the holders, into shares of the Company’s common stock, at an initial conversion rate of 757.5758 shares per $1,000 principal amount of the 2025 Notes (equivalent to an initial conversion price of approximately $1.32 per share).

The 2025 Notes also contained an embedded conversion option requiring bifurcation as a separate derivative liability, along with the fundamental change make-whole provision and the cash settled fundamental make-whole shares provision. The derivative is adjusted to fair value at each reporting period, with the change in the fair value recorded to other income (expense) in the Company’s consolidated statement of operations and comprehensive loss. The fair value of the derivative at March 31, 2022 and December 31, 2021 was $46.0 million and $81.4 million, respectively.

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In connection with the Exchange on April 24, 2020, $24.0 million aggregate principal of the Company’s outstanding 2025 Notes held by Highbridge Capital Management, LLC (“Highbridge”) were exchanged for $15.7 million of Second Lien Notes (the “Second Lien Notes”), (i) 11,026,086 shares of common stock, (ii) warrants to purchase ~~warrants, which was estimated~~up to ~~be $526,209, was recorded~~4,500,000 shares of common stock at an exercise price of $0.66 per share, and (iii) $0.3 million in accrued and unpaid interest on the 2025 Notes being exchanged (the “Exchange”). This transaction modified the original 2025 Notes outstanding with Highbridge and resulted in $13.2 million of deferred issuance fees and debt discounts associated with the exchanged 2025 Notes being transferred as a discount to the Second Lien Notes.

As of December 31, 2021, there were conversions of $6.5 million of outstanding principal amount of the 2025 notes for 4,924,998 shares of common stock. Accordingly, $3.2 million of allocated deferred issuance costs and debt discounts were recognized as a loss on extinguishment of debt as of December 31, 2021. There was no activity for the three months ended March 31, 2022.

2023 Notes

In the first quarter of 2018, the Company issued $53.0 million in aggregate principal amount of senior convertible notes due February 1, 2023 (the “2023 Notes”). In July 2019, the Company used the net proceeds from the issuance of the 2025 Notes to repurchase $37.0 million aggregate principal amount of the outstanding 2023 Notes. Each $1,000 of principal of the 2023 Notes is initially convertible into 294.1176 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $3.40 per share, subject to adjustment upon the occurrence of specified events. Holders may convert at any time prior to February 1, 2023. Holders who convert on or after the date that is six months after the last date of original issuance of the 2023 Notes but prior to February 1, 2021, may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in shares of common stock. If specific corporate events occur prior to the maturity date, the Company will increase the conversion rate pursuant to the make-whole fundamental change provision for a holder who elects to convert their 2023 Notes in connection with such an event in certain circumstances. Additionally, if a fundamental change occurs prior to the maturity date, holders of the 2023 Notes may require the Company to repurchase all or a portion of their 2023 Notes for cash at a repurchase price equal to 100% of the principal amount plus any accrued and unpaid interest.

The Company bifurcated the embedded conversion option, along with the interest make-whole provision and make-whole fundamental change provision, and in January 2018 recorded the embedded features as a debt discount and derivative liability in the Company’s consolidated balance sheets at its initial fair value of $17.3 million. Additionally, the Company incurred transaction costs of $2.2 million. The debt discount and transaction costs are being amortized as

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~~additional~~to interest expense over the term of the 2023 Notes at an effective interest rate of 9.30%. The derivative is adjusted to fair value at each reporting period, with the change in the fair value recorded to other income (expense) in the Company’s consolidated statement of operations and comprehensive loss. The fair value of the derivative at March 31, 2022 and December 31, 2021 was $1.7 million and $5.8 million, respectively.

The 2023 Notes do not have current observable inputs such as recent trading prices (Level 3) and are measured at fair value using the ~~effective interest method.~~binomial option pricing model and incorporate management’s assumptions for probabilities of conversion occurrence through maturity, stock price, volatility and risky (bond) rate. There were 0 conversions of 2023 Notes for the three months ended March 31, 2022. As the 2023 Notes have a maturity date of February 1, 2023, they are classified as other current liability on the Company’s consolidated balance sheet at March 31, 2022.

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The following carrying amounts were outstanding under the Company’s notes payable as of March 31, 2022 and December 31, 2021 (in thousands):

~~At maturity (or earlier prepayment),~~


	March 31, 2022
	Principal ($)	Debt Discount ($)	Issuance Costs ($)	Carrying Amount ($)
2023 Notes	15,700	(1,166)	-	14,534
2025 Notes	51,199	(19,261)	(322)	31,616
PHC Notes	35,000	(17,511)	(1,070)	16,419
PPP Loan	732	-	-	732

	December 31, 2021
	Principal ($)	Debt Discount ($)	Issuance Costs ($)	Carrying Amount ($)
2023 Notes	15,700	(1,499)	-	14,201
2025 Notes	51,199	(20,535)	(344)	30,320
PHC Notes	35,000	(18,587)	(1,136)	15,277
PPP Loan	2,926	-	-	2,926

Interest expense related to the ~~Company is also required to make a final payment equal to 9.00% of~~notes payable for the ~~aggregate principal balances of the funded Term Loans. This fee is being accrued~~three months ended March 31, 2022 and 2021 was as additional interest expense over the term of the Notes using the effective interest method. In the event that the Company achieves the requirements to borrow the Tranche 4 Term Loan, and elects not to borrow the Tranche 4 Term Loan, the Company is obligated to pay the Lenders a non-utilization fee of 2.00% of the undrawn amounts.follows (dollars in thousands):


	Three Months Ended March 31, 2022
	Interest Rate	Interest ($)	Debt Discount and Fees ($)	Issuance Costs ($)	Loss on Extinguishment ($)	Total Interest Expense ($)
2023 Notes	5.25%	206	333	-	-	539
2025 Notes	5.25%	658	1,274	21	-	1,953
PHC Notes	9.50%	831	1,076	66	-	1,973
PPP Loan	1.00%	5	-	-	-	5
Total		1,700	2,683	87	-	4,470


	Three Months Ended March 31, 2021
	Interest Rate	Interest ($)	Debt Discount and Fees ($)	Issuance Costs ($)	Loss on Extinguishment ($)	Total Interest Expense ($)
2023 Notes	5.25%	206	303	-	-	509
2025 Notes	5.25%	757	1,110	18	3,183	5,068
PHC Notes	9.50%	794	804	49	-	1,647
PPP Loan	1.00%	14	-	-	-	14
Total		1,771	2,217	67	3,183	7,238

The following are the scheduled maturities of the ~~Term Loans~~Company’s notes payable as of ~~September 30, 2017~~March 31, 2022 (in thousands):

2017 (remaining three months)

$
—

2018

10,000

2019

10,000

2020

5,000

Total

$
25,000


2022 (remaining nine months)	$	732
2023		15,700
2024		35,000
2025		51,199
Thereafter
Total	$	102,631

9.	Stockholders’ Deficit

~~10.Stockholders’ Equity (Deficit)~~

~~Preferred Stock~~

~~As of September 30, 2017~~In November 2021, the Company entered into the 2021 Sales Agreement with Jefferies, under which the Company could offer and ~~December 31, 2016, the Company’s authorized capital stock included 5,000,000~~sell, from time to time, at its sole discretion, shares of ~~undesignated preferred~~its common stock ~~par value $0.001 per share. No~~having an aggregate offering price of up to $150.0 million through Jefferies as the sales agent in an “at the market” offering. Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. During the three months ended March 31, 2022, the Company received $8.0 million in net proceeds from the sale of 3,077,493 shares of ~~preferred~~its common stock ~~were outstanding as of September 30, 2017 or December~~under the 2021 Sales Agreement.

During the three months ended March 31, ~~2016.~~

~~Common Stock~~

~~As of September 30, 2017 and December 31, 2016,~~2021, the ~~Company’s authorized capital stock included 250,000,000~~Company sold 99,740,259 shares of common stock, ~~par value $0.001 per share. The Company had 136,691,128 and 93,569,642~~of which 59,740,259 shares of common stock ~~issued~~were sold in the Offering and ~~outstanding at September 30, 2017 and December 31, 2016, respectively.~~

~~Stock Purchase Warrants~~

~~In connection with the issuance of the Notes, the Company also issued to the Lenders 10-year stock purchase warrants to purchase an aggregate of 116,581, 63,025 and 80,645~~40,000,000 shares of common stock ~~at an exercise price~~were sold

Table of ~~$3.86, $2.38 and $1.86 per share, respectively. The fair value of~~Contents

in the ~~warrants, which~~Registered Direct Offering. For additional information on the Company estimated to be $526,209, was recorded as a discount to the Notes. These warrants expire on June 30, 2026, November 22, 2026, and March 29, 2027, respectively, and are classified in equity. In connection with the Company’s original Loan and Security Agreement with Oxford in 2014, the Company issued to Oxford 10-year stock purchase warrants to purchase an aggregate of 167,570 shares of common stock at an exercise price of $1.79 per share. The fair value of the warrants, which the Company estimated to be $205,150, was recorded as a discount to the promissory notes issued to Oxford in connection with the original Loan and Security Agreement. These warrants expire on November 2, 2020, July 14, 2021 and August 19, 2021, and are classified in equity. The unamortized deferred financing fees and debt discount related to the notes rollover amount will be amortized along with the deferred financing costsOffering and the ~~discount created by the new issuance of the warrants over the term of the loan using the effective interest method. For the three months ended September 30, 2017~~Registered Direct Offering, see Note 2—Liquidity and 2016, the Company recorded amortization of discount of debt of $59,061 and $38,825, respectively, and for the nine months ended September 30, 2017 and 2016, the Company recorded amortization of discount of debt of $170,859 and $65,835, respectively, within interest expense in the accompanying statements of operations and comprehensive loss.Capital Resources.

~~Restricted Stock Awards~~10. Stock-Based Compensation

~~The Company issued 398,525 shares of restricted stock to the chairman of the Company’s board of directors (the “Chairman”) in December~~ 2015 half of which were vested upon grant and half of which vested upon the completion of the March 2016 Offering, pursuant to an agreement between the Company and the Chairman, as described in greater detail

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in Note 11. In June 2016, the Company issued a fully vested restricted stock award for 300,000 shares of common stock to the Chairman to settle the outstanding obligations under the agreement. The Company recognized stock-based compensation expense of $0 and $1.2 million in the three and nine months ended September 30, 2016, respectively, related to the grant and vesting of this restricted stock. No compensation expense was recognized related to the grant or vesting of this restricted stock in 2017.Plan

~~Stock‑Based Compensation~~

In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”), under which incentive stock options, ~~and~~ non-qualified stock options and restricted stock units may be granted to the Company’s employees and certain other persons, such as officers and directors, in accordance with the 2015 Plan provisions. In ~~connection with the March~~February 2016, ~~Offering,~~ the Company’s ~~board~~Board of ~~directors~~Directors adopted, and the Company’s stockholders approved, an Amended and Restated 2015 Equity Incentive Plan (the “amended and restated 2015 Plan”)~~. The amended and restated 2015 Plan~~, which became effective ~~as of the date of the pricing of the March 2016 Offering.~~on February 20, 2016. The Company’s board of directors may terminate the amended and restated 2015 Plan at any time. Options granted under the amended and restated 2015 Plan expire ten years after the date of grant.

Pursuant to the amended and restated 2015 Plan, the number of shares initially reserved for issuance pursuant to equity awards was 17,251,115 shares, representing 8,000,000 shares plus up to an additional 9,251,115 shares in the event that options that were outstanding under the Company’s equity incentive plans as of February 16, 2016 expire or otherwise terminate without having been exercised (in such case, the shares not acquired will revert to and become available for issuance under the amended and restated 2015 Plan). The number of shares of the Company’s common stock reserved for issuance ~~under the amended and restated 2015 Plan will~~ automatically ~~increase~~increases on January 1 of each year, ~~beginning on January 1, 2017 and~~ ending on January 1, 2026, by 3.5% of the total number of shares of ~~the Company’s~~its common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by ~~the Company’s~~its board of directors. As of ~~September 30, 2017, 3,124,950~~March 31, 2022, 25,668,399 shares remained available for grant under the amended and restated 2015 Plan.

Inducement Plan

On May 30, 2019, the Company adopted the Senseonics Holdings, Inc. Inducement Plan (the “Inducement Plan”), pursuant to which the Company reserved 1,800,000 shares of the Company’s common stock for issuance. The only persons eligible to receive grants of awards under the Inducement Plan are individuals who satisfy the standards for inducement grants in accordance with NYSE American Company Guide Section 711(a), including individuals who were not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company. An “Award” is any right to receive the Company’s common stock pursuant to the Inducement Plan, consisting of non-statutory options, restricted stock unit awards and other equity incentive awards. As of March 31, 2022, 962,795 shares remained available for grant under the Inducement Plan.

2016 Employee Stock Purchase Plan

In February 2016, the Company adopted the 2016 Employee Stock Purchase Plan, (the “2016 ESPP”). The 2016 ESPP became effective on March 17, 2016. The maximum number of shares of common stock that may be issued under the 2016 ESPP was initially 800,000 shares and automatically increases on January 1 of each year, ending on and including January 1, 2026, by 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year; provided, however, the Board of Directors may act prior to the first day of any calendar year to provide that there will be no January 1 increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of common stock. At March 31, 2022 there were 13,114,632 shares of common stock available for issuance under the 2016 ESPP. For the three months ended March 31, 2022, there were purchases of 28,944 shares of common stock pursuant to this plan.

The 2016 ESPP permits participants to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their earnings. Unless otherwise determined by the administrator, the purchase price of the shares will be 85% of the lower of the fair market value of common stock on the first day of an offering or on the date of purchase. Participants may end their participation at any time and deductions not yet used in a purchase are refundable upon employment termination. The Company initiated its first 2016 ESPP offering period on August 1, 2019 and new offering periods occur every six months thereafter, each consisting of 2 purchase periods of six months in duration ending on or about January 31^st and July 31^st of each year. A participant may only be in one offering at a time. On February 1, 2020, there were 566,573 shares purchased in connection with the initial offering period. The 2016 ESPP contains an offering reset provision whereby if the fair market value of a share on offering date of an ongoing offering is

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less than or equal to the fair market value of a share on a new offering date, the ongoing offering will terminate immediately after the purchase date and rolls over to the new offering.

The 2016 ESPP is considered compensatory for financial reporting purposes.

1997 Plan

On May 8, 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”), under which incentive stock options, ~~and non‑qualified~~non-qualified stock options, and restricted stock awards may be granted to the Company’s employees and certain other persons in accordance with the 1997 Plan provisions. Approximately ~~8,393,136~~2,025,915 shares of the Company’s common stock underlying options have vested ~~or are expected to vest~~ under the 1997 Plan. Upon the effectiveness of the 2015 Plan, the Company no longer grants any awards under the 1997 Plan.

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award for those awards with service conditions only. For awards that also contain performance conditions, expense is recognized beginning at the time the performance condition is considered probable of being met over the remaining vesting period.

~~11.Related Party Transactions~~

In December 2015, the Chairman received a restricted stock award of 398,525 shares of common stock pursuant to an agreement entered into with the Company (the “December Agreement”) that superseded a pre-existing agreement. One half of the shares covered by this restricted stock award were fully vested on grant. The remainder vested in full upon the completion of the Company’s March 2016 Offering, which was the specific performance condition of the award. Additionally, as a result of the completion of the March 2016 Offering, pursuant to the December Agreement, the Chairman was entitled to receive estimated compensation in the amount of $785,000. In June 2016, the Chairman received a restricted stock award of 300,000 shares of common stock pursuant to an agreement entered into with the Company that superseded the December Agreement and satisfied the outstanding compensation obligation under the December Agreement. All of the shares covered by this restricted stock award were fully vested on date of grant.

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~~12.Fair Value Measurements~~

Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. Fair value has a three level hierarchy from highest priority (Level 1) to lowest priority (Level 3). The fair value hierarchy reflects whether the inputs are observable from independent sources or rely on unobservable inputs based on the Company’s market assumptions. The three levels of the fair value hierarchy are described below:

11.

~~Level 1—Quoted prices for identical assets or liabilities (unadjusted) in active markets.~~Fair Value Measurements

~~Level 2—Observable inputs other than quoted prices that are either directly or indirectly observable for the assets or liability.~~

~~Level 3—Unobservable inputs that are supported by little or no market activity.~~

~~The levels are not necessarily an indication of the risk of liquidity associated with the financial assets or liabilities disclosed.~~

~~Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis~~

The Company has segregated its financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. The inputs used in measuring the fair value of the Company’s money market funds included in cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the funds.

The following table represents the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021 (in thousands):


	March 31, 2022
	Total		Level 1		Level 2		Level 3
Assets
Money market funds⁽¹⁾	$	37,673	$	37,673		—		—
Commercial paper		31,011		—		31,011		—
Corporate debt securities		43,796		—		43,796		—
Asset backed securities		18,908		—		18,908		—
Government and agency securities		34,185		29,715		4,470		—
PHC Option		269		—		—		269
Liabilities
Energy Capital Option	$	47,700	$	—		—		47,700
Embedded features of the 2023 Notes		1,713		—		—		1,713
Embedded features of the PHC Notes		104,003		—		—		104,003
Embedded features of the 2025 Notes		46,007		—		46,007		—


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets
Money market funds⁽¹⁾	$	29,197	$	29,197		—		—
Corporate debt securities		39,748		—		39,748		—
Commercial paper		57,369		—		57,369		—
Asset backed securities		26,707		—		26,707		—
Government and agency securities		24,503		19,957		4,546		—
PHC Option		239		—		—		239
Liabilities
Energy Capital Option	$	69,401	$	—		—		69,401
Embedded features of the 2023 Notes		5,817		—		—		5,817
Embedded features of the PHC Notes		149,058		—		—		149,058
Embedded features of the 2025 Notes		81,417		—		81,417		—

September 30, 2017


Total

Level 1

Level 2

Level 3

Money market funds

$
20,349

$
20,349

$
—

$
—

Government and agency securities

3,982

—

3,982

—

Corporate debt securities

18,935

—

18,935

—

(1)Classified as cash and cash equivalents due to their short-term maturity

December 31, 2016


Total

Level 1

Level 2

Level 3

Money market funds

$
10,601

$
10,601

$
—

$
—

Government and agency securities

1,201

—

1,201

—

Corporate debt securities

6,589

—

6,589

—

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~~Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis~~

The ~~Company has no financial assets~~following table provides a reconciliation of the beginning and ~~liabilities that are measured at fair value on a non-recurring basis.~~

~~Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis~~

~~The Company has no non-financial assets and liabilities that are~~ending net balances of items measured at fair value on a recurring ~~basis.~~basis that used significant unobservable inputs (Level 3) (in thousands):



	Level 3
	Instruments
December 31, 2021	$	224,037
Gain on fair value adjustment of option		(21,701)
Gain on change in fair value of derivatives		(49,159)
Financial asset impairment cost, net		(30)
March 31, 2022	$	153,147

~~Non‑Financial Assets and Liabilities Measured at Fair Value on a Non‑Recurring Basis~~

The ~~Company measures its long‑lived assets, including property and equipment, at~~recurring Level 3 fair value ~~on a non‑recurring basis. These assets are recognized~~measurements of the embedded features of the notes payable and preferred stock, include the following significant unobservable inputs at ~~fair value when they are deemed to be impaired. No such fair value impairment was recognized in the three and nine months ended September 30, 2017 and 2016.~~March 31, 2022:


	2023 Notes		PHC Notes		PHC Option		Energy Capital Option
Unobservable Inputs	Assumptions		Assumptions		Assumptions		Assumptions
Stock price volatility	95.0	%	102.0	%	90.0	%	91.0	%
Probabilities of conversion provisions	5.0 - 10.0	%	5.0 - 10.0	%	5.0 - 10.0	%	5.0 - 10.0	%
Time period until maturity (yrs)	0.84		2.59		0.75		0.00 - 0.61
Dividend yield	—	%	—	%	—	%	—	%

12.

Income Taxes

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~~13.Income Taxes~~

The Company has ~~not~~0t recorded any tax provision or benefit for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 or ~~September 30, 2016.~~March 31, 2021. The Company has provided a valuation allowance for the full amount of its net deferred tax assets since realization of any future benefit from deductible temporary differences, NOL carryforwards and research and development credits is not more-likely-than-not to be realized at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~2021.

~~14.Litigation~~

On March 27, 2020, Congress enacted the CARES Act, as amended by the Flexibility Act, to provide certain relief as a result of the COVID-19 pandemic. The enactment of the CARES Act did not result in any material adjustments to the Company’s income tax provision or net deferred tax assets for the three months ended March 31, 2022.

~~From time to time,~~

13. Related Party Transactions

Ascensia, through the ~~Company is subject to litigation and claims arising~~ownership interests of its parent company, PHC, has a noncontrolling ownership interest in the ~~ordinary course~~Company. Ascensia also has representation on the Company’s board of ~~business. The Company accrues for litigation~~directors. Revenue from Ascensia during the three months ended March 31, 2022 and ~~claims when it is probable that a liability has been incurred~~March 31, 2021 was $2.2 million and $2.4 million, respectively and the amount of loss can be reasonably estimated. The Company has evaluated claims in accordance with the accounting guidance for contingencies that it deems both probable and reasonably estimable and, accordingly, has recorded aggregate liabilities for all claims of approximately $40,000due from Ascensia as of March 31, 2022 and December 31, ~~2016. These amounts are reported on the consolidated balance sheets within accrued~~2021 was $3.8 million and ~~other liabilities~~$1.8 million, respectively. The amount due to Ascensia as of March 31, 2022 and ~~other noncurrent liabilities. This liability~~December 31, 2021 was settled for $43,237 on April 4, 2017. As of September 30, 2017, there were no recorded liabilities related to pending litigation, claims arising from the ordinary course of business, or other legal matters.$3.7 million and $2.5 million, respectively

14. Subsequent Events

None.

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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks, uncertainties, and ~~uncertainties,~~assumptions, including the duration and severity of the COVID-19 pandemic and its impact on our business and financial performance, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those described below and elsewhere in this Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K, particularly in Part I – Item 1A, “Risk Factors,” and our other filings with the Securities and Exchange Commission. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, ~~2016,~~2021, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on ~~February 23, 2017.~~

~~Overview~~

We were originally incorporated as ASN Technologies, Inc. in Nevada on June 26, 2014. On December 4, 2015, we were reincorporated in Delaware and changed our name to Senseonics Holdings, Inc. Also, on December 4, 2015, we entered into a merger agreement with Senseonics, Incorporated and SMSI Merger Sub, Inc., or the Merger Agreement, to acquire Senseonics, Incorporated. Senseonics, Incorporated was originally incorporated on October 30, 1996 and commenced operations on January 15, 1997. The transactions contemplated by the Merger Agreement were consummated on December 7, 2015, referred to herein as the Acquisition. Pursuant to the terms of the Merger Agreement, (i) all issued and outstanding shares of Senseonics, Incorporated's preferred stock were converted into shares of Senseonics, Incorporated common stock, $0.01 par value per share, or the Senseonics Shares, (ii) all outstanding Senseonics Shares were exchanged for 57,739,953 shares of our common stock, $0.001 par value per share, or the Company Shares, reflecting an exchange ratio of one Senseonics Share for 2.0975 Company Shares, or the Exchange Ratio, and (iii) all outstanding options and warrants to purchase Senseonics Shares, or the Senseonics Options and Senseonics Warrants, respectively, were each exchanged or replaced with options and warrants to acquire shares of our common stock, or the Company Options and Company Warrants, respectively. Accordingly, Senseonics, Incorporated became our wholly-owned subsidiary.

Following the closing of the Acquisition, the business of Senseonics, Incorporated became our sole focus and all of our operations following the closing of the Acquisition consist of the historical Senseonics, Incorporated business.March 1, 2022. Unless otherwise indicated or the context otherwise requires, all references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to ~~"the Company," "we," "our," "ours," "us"~~the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to ~~(i) Senseonics, Incorporated prior to the closing of the Acquisition, and (ii)~~ Senseonics Holdings, Inc. and its subsidiaries subsequent to the closing of the Acquisition and all share and per share information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section gives retroactive effect to the exchange of Senseonics Shares, Senseonics Options and Senseonics Warrants for Company Shares, Company Options and Company Warrants, respectively, in the Acquisition, as well as the corresponding exercise price adjustments for the such options and warrants.subsidiary.

Overview

We are a medical technology company focused on the ~~design,~~ development and ~~commercialization~~manufacturing of glucose monitoring products designed to ~~improve~~transform lives in the ~~lives of people~~global diabetes community with ~~diabetes by enhancing their ability to manage their disease with relative ease~~differentiated, long-term implantable glucose management technology. Our Eversense, Eversense XL and ~~accuracy. Our~~Eversense E3 continuous glucose monitoring ~~or CGM,~~(“CGM”) systems ~~Eversense and Eversense XL,~~ are

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~~reliable, long‑term, implantable CGM systems that we have~~ designed to continually and accurately measure glucose levels in people with diabetes via an under-the-skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time diabetes monitoring and management for a period of up to 90six months in the case of Eversense E3 and ~~180 days, respectively,~~Eversense XL, as compared to ~~six~~seven to ~~fourteen~~14 days for ~~currently available~~non-implantable CGM systems. We ~~believe~~affixed the CE mark to the original Eversense ~~and~~CGM system in June 2016, which marked the first certification for the product to be sold within the European Economic Area (“EEA”). Subsequently, we affixed the CE mark to the extended life Eversense XL ~~will provide people with diabetes with a more convenient method to monitor their glucose levels~~CGM system in ~~comparison with the traditional method of self‑monitoring of blood glucose, or SMBG, as well as~~September 2017 which is currently available ~~CGM systems. Our Eversense and Eversense XL systems are currently approved for sale~~in select markets in Europe and ~~we submitted our Eversense system pre-market approval, or PMA, application to~~the Middle East. In June 2018, the U.S. Food and Drug Administration or(“FDA”), approved the Eversense CGM system and it is currently available throughout the United States. In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense system. With this approval and the availability of a new app in ~~October 2016. We intend to initiate commercial launch~~December 2019, the Eversense system can now be used as a therapeutic CGM in the United States ~~promptly following~~to replace fingerstick blood glucose measurement to make treatment decisions, including insulin dosing. In February 2022, the ~~receipt~~extended life Eversense E3 CGM system was approved by the FDA and Ascensia Diabetes Care Holdings AG (“Ascensia”) began commercializing Eversense E3 in the United States in the second quarter of ~~PMA approval.~~2022.

~~Corporate History~~Our net revenues are derived from sales of the Eversense system which is sold in two separate kits: the disposable Eversense Sensor Pack which includes the sensor, insertion tool, and adhesive patches, and the durable Eversense Smart Transmitter Pack which includes the transmitter and charger.

~~From~~We sell directly to our ~~founding~~network of distributors and strategic fulfillment partners, who provide the Eversense system to healthcare providers and patients through a prescribed request and invoice insurance payors for reimbursement. Sales of the Eversense system are widely dependent on the ability of patients to obtain coverage and

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adequate reimbursement from third-party payors or government agencies. We leverage and target regions where we have coverage decisions for patient device use and provider insertion and removal procedure payment. We have reached over 200 million covered lives in ~~1996 until 2010,~~the U.S. through positive insurance payor coverage decisions. During 2020, we ~~devoted substantially~~received positive payor coverage decisions from Cigna Corporation, who has more than 17 million medical customers and offers a Medicare Advantage plan in 17 states and Washington, DC, Blue Cross and Blue Shield plans, and announced local coverage determinations (“LCDs”) proposals for implantable therapeutic CGMs such as Eversense by all the Medicare Administrative Contractors to enable Eversense to be used by Medicare beneficiaries as a Part B physician service. On August 3, 2020, the Center for Medicare and Medicaid Services (“CMS”) released its Calendar Year 2021 Medicare Physician Fee Schedule Proposed Rule that announces proposed policy changes for Medicare payments, including the proposed establishment of national payment amounts for the three CPT© Category III codes describing the insertion (CPT 0446T), removal (0447T), and removal and insertion (0048T) of an implantable interstitial glucose sensor, which describes our Eversense CGM systems, as a medical benefit, rather than as part of the Durable Medical Equipment channel that includes other CGMs. In December 2021, CMS released its Calendar Year 2022 Medicare Physician Fee Scheduled that update global payments for the device cost and procedure fees. In 2022, we are working with payors to transition their policies to E3 and have confirmed immediate coverage policy transition from select payors.

We are in the early commercialization stages of the Eversense brand and are focused on driving awareness of our ~~resources to researching various sensor technologies~~CGM system amongst intensively managed patients and ~~platforms. Beginning in 2010, we narrowed~~their healthcare providers. In both the United States and our focus to designing, developing and refining a commercially viable glucose monitoring system. On May 10, 2016, we received regulatory approval to commercialize Eversense in Europe. In June 2016, we made our first product shipment of Eversense through our distribution agreement with Rubin Medical, or Rubin. Since our inception,overseas markets, we have ~~funded our activities primarily through equity and debt financings.~~

In March 2016, we completed a public offering of our common stock, or the March 2016 Offering, selling 15,800,000 shares of common stock at a price to the public of $2.85 per share, for aggregate gross proceeds of $45.0 million. Net proceeds from the March 2016 Offering were approximately $40.9 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us. In April 2016, the underwriters for the March 2016 Offering partially exercised their option to purchase additional shares of common stock, purchasing an additional 1,439,143 shares, from which we received additional net proceeds of approximately $3.9 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us.

~~On June 30, 2016 we~~ entered into ~~an Amended~~strategic partnerships and ~~Restated Loan~~distribution agreements that allow third party collaborators with direct sales forces and ~~Security Agreement with Oxford Finance LLC,~~established distribution systems to market and promote Senseonics CGM systems, including Eversense, Eversense XL, Eversense E3 and future generation products.

COVID-19

The current COVID-19 pandemic (“COVID-19”) has presented a substantial public health and economic challenge around the world and is affecting our employees, customers, communities and business operations, as well as the U.S. economy and financial markets. The full extent to which the COVID-19 pandemic will directly or ~~Oxford,~~indirectly impact our business, results of operations and ~~Silicon Valley Bank,~~financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and its variants, the actions taken to contain it or ~~SVB,~~mitigate its impact and the economic impact on local, regional, national and international markets. We will continue to ~~potentially borrow up to an aggregate principal amount of $30.0 million. Under~~monitor the ~~terms~~overall impact of the ~~agreement, we initially borrowed an aggregate of $15 million from Oxford~~COVID-19 pandemic on our business, financial condition, liquidity, assets and ~~SVB on June 30, 2016. We used $11 million of the $15 million to retire existing loans with Oxford,~~operations, including ~~a final payment fee of $1 million. In each of November 2016~~our personnel, programs, expected timelines, expenses and March 2017, we borrowed an additional $5 million upon achieving certain milestones. The agreement also permits us to borrow up to an additional $5 million upon the achievement of specified milestones through the end of 2017. The agreement provides for monthly payments of interest only for a period of 18 months, followed by an amortization period of 30 months.third-party contract manufacturing and distribution.

In June 2017, we completed an underwritten offering of our common stock, or the May 2017 Offering, selling 29,078,014 shares of common stock at a price of $1.41 per share, for aggregate gross proceeds of $41.0 million. Net proceeds from the May 2017 Offering were approximately $40.4 million, after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us.

In August 2017, we completed an underwritten offering of our common stock, or the August 2017 Offering, selling 13,383,125 shares of common stock at a price of $2.15 per share, for aggregate gross proceeds of $28.8 million. Net proceeds from the August 2017 Offering were approximately $26.5 million after deducting underwriting discounts and commissions and estimated offering-related transaction costs payable by us.

We have never been profitable and our net losses were $17.4 million and $10.9 million for three months ended September 30, 2017 and 2016, respectively, and $42.8 million and $34.0 million for the nine months ended September 30, 2017 and 2016, respectively. As ~~of September 30, 2017, our accumulated deficit totaled $247.5 million, primarily as~~ a result of ~~expenses incurred~~the COVID-19 pandemic’s disruption to our operations, suppliers, employees, and the healthcare community in ~~connection~~which we sell to and support, and our limited cash resources, in March 2020, we made significant reductions in our cost structure and operations to improve cash flow and generate future expenditure savings to ensure the long-term success of Eversense. Specifically, in the first quarter of 2020, we temporarily suspended commercial sales and marketing of the Eversense CGM System and we reduced our workforce by approximately 60%.

In addition, in response to the ongoing spread of COVID-19, we have established safety protocols for personnel access to our headquarter offices. The effects of the COVID-19 pandemic could adversely impact our business, assets, operations and sales, particularly if the COVID-19 pandemic continues to persist for an extended period of time. See “Our business, product sales and results of operations could be adversely affected by the effects of health epidemics, including the recent COVID-19 outbreak, in regions where we or third parties distribute our products or where we or third parties on which we rely have significant manufacturing facilities, concentrations, clinical trial sites or other business operations. The COVID-19 pandemic has and may continue to, materially affect our operations, including at our headquarters in Maryland and at our clinical trial sites, as well as the business or operations of our manufacturers, distributors or other third parties with whom we conduct business” in the Risk Factors section of our ~~research~~most recent Annual Report on Form 10-K for more information regarding the potential impact of the COVID-19 pandemic on our business and ~~development programs and from general and administrative expenses associated with our~~ operations. We ~~expect to~~ continue to ~~incur significant expenses~~actively monitor this situation and ~~increasing operations~~the possible effects on our business and ~~net losses for the foreseeable future.~~operations.

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~~European~~United States Development and Commercialization of Eversense

In May 2016, we received our CE mark for Eversense, which allows us to market and sell Eversense in Europe. In connection with our CE Mark, we have agreed to conduct post market surveillance activities. In June 2016, we commenced commercialization of Eversense in Sweden through our distribution agreement with Rubin, which also has the right to distribute Eversense in Norway and Denmark. Rubin markets and sells medical products for diabetes treatment in the Scandinavian region, including as the exclusive Scandinavian distributor for the insulin pump manufacturer Animas Corporation.

~~In May 2016, we entered into a distribution agreement with Roche Diagnostics~~ International AG and Roche Diabetes Care GmbH, together referred to as Roche, pursuant to which we granted Roche the exclusive right to market, sell and distribute Eversense in Germany, Italy and the Netherlands. In November 2016, we entered into an amendment to the distribution agreement granting Roche the exclusive right to market, sell and distribute Eversense in Europe, the Middle East and Africa, excluding Sweden, Norway, Denmark, Finland and Israel. Roche is a pioneer in the development of blood glucose monitoring systems and a global leader for diabetes management systems and services. We began distributing Eversense through Roche in Germany in September 2016 and in Italy and the Netherlands in the fourth quarter of 2016. To date, we have begun distributing Eversense in an aggregate of 13 European countries through Rubin and Roche.

In September 2017, we received the CE Mark for Eversense XL, which is indicated for a sensor life to up to 180 days. We plan to begin to commercialize Eversense XL in selected European countries by the end of 2017. We are also developing Eversense Now, an application designed to remotely monitor the Eversense users’ CGM data in real time. We expect to receive approval to market Eversense Now in Europe by the end of 2017.

~~United States Development of Eversense~~

In 2016, we completed our ~~Precise~~PRECISE II pivotal clinical trial in the United States. This trial, which was fully enrolled with 90 subjects, was conducted at eight sites in the United States. In the trial, we measured the accuracy of Eversense measurements through 90 days after insertion. We also assessed safety through 90 days after insertion or through sensor removal. In the trial, we observed a mean absolute relative difference ~~or MARD,~~(“MARD”), of ~~8.8%~~8.5% utilizing two calibration points ~~for Eversense across the 40-400 mg/dL range when compared to YSI blood reference values during the 90-day continuous wear period. We also observed a MARD of 9.5% utilizing one calibration point~~ for Eversense across the 40-400 mg/dL range when compared to YSI blood reference values during the 90-day continuous wear period. Based on the data from this trial, in October 2016 we submitted a pre-market approval ~~or PMA,~~(“PMA”), application to the FDA to market Eversense in the United ~~States. We are currently anticipating approval in the first half of 2018. However, the ultimate timing of~~States for 90-day use. On June 21, 2018, we received PMA approval ~~is uncertain and will depend on many factors, including whether~~from the FDA ~~would require~~for the ~~review of~~ Eversense ~~by an advisory panel and~~system. In July 2018, we began distributing the related logistics of convening a panel, the degree and nature of questions raised by the FDA in its review process, and our ability to submit additional data or other information that adequately addresses questions raised by the FDA. Accordingly, we cannot guarantee the timing of receipt of PMA approval, if at all. For commercializationEversense system directly in the United States ~~we intend to distribute our product~~ through our own direct sales and marketing organization. We have received Category III CPT codes for the insertion and removal of the Eversense sensor.

In December 2018, we initiated the PROMISE pivotal clinical trial to evaluate the safety and accuracy of Eversense for a period of up to six months in the United States and in September 30, 2019, we completed enrollment of the PROMISE trial. In the trial, we observed performance matching that of the then current Eversense 90-day product available in the United States, with a MARD of 8.5%. This result was achieved with reduced calibration, down to one per day, while also doubling the sensor life to six months. Following the results of the PROMISE trial, on September 30, 2020, a Premarket Approval, or PMA, supplement application to extend the wearable life of the Eversense CGM System to six months was submitted to the FDA. In February 2022, the extended life Eversense E3 CGM system was approved by the FDA.

In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense system and launched with an updated app in December 2019. With this approval, the Eversense system can be used as a therapeutic CGM to replace fingerstick blood glucose measurement for treatment decisions, including insulin dosing.

On February 26, 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to continue for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor. This sub-set of 30 participants were left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days. Following information gathered from this sub-set and continued development efforts, and pending developments at the FDA relating to the ongoing COVID-19 pandemic, we plan to seek Investigational Device Exemption (“IDE”) from the FDA to explore the 365-day sensor in a clinical trial. If the IDE is approved in a timely manner, we would target to begin enrollment of a clinical trial, in which we intend to ~~pursue~~include a ~~Category I CPT code.~~pediatric population, in the second half of 2022.

~~We expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.~~ In ~~addition,~~April 2020, we expect that our expenses will increase substantially as we continue the research and development of our other products and maintain, expand and protect our intellectual property portfolio and seek regulatory approvals in other jurisdictions. Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expensesannounced that we received regulatory approval in Europe such that the Eversense XL is no longer contraindicated for MRI, which means the sensor does not need to be removed from under the skin during MRI scanning. We had previously obtained this indication for Eversense in the United States in 2019. This MRI approval is a first for the CGM category, as all other sensors are required to be removed during an MRI scan.

On August 9, 2020, we entered into a collaboration and commercialization agreement with Ascensia (the “Commercialization Agreement”) pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense CGM system and our 180-day Eversense CGM system worldwide, with the following initial exceptions: (i) until January 31, 2021, the territory did not ~~incur~~include countries covered by our then existing distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH (together “Roche”), which are the Europe, Middle East and Asia, excluding Scandinavia and Israel, and 17 additional countries, including Brazil, Russia, India and China, as ~~a private company. We will need~~well as select markets in the Asia Pacific and Latin American regions; (ii) until September 13, 2021, the territory did not include countries covered by our current distribution agreement with Rubin Medical, which are Sweden, Norway and Denmark; and (iii) until May 31, 2022, the territory does not include Israel. Pursuant to ~~obtain substantial additional funding~~the Commercialization Agreement, in connection with our continuing operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. However, we may be unable to raise additional funds when neededthe United States, Ascensia began providing sales support for the 90-day Eversense product on ~~favorable terms or at all. Our failure to raise such capital as~~October 1, 2020 and ~~when needed would have a material~~Ascensia ramped up sales activities and ~~adverse impact on our financial condition and our ability to develop and commercialize~~assumed commercial responsibilities for the 90-day Eversense ~~and future products and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.~~product during the second quarter of 2021.

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In February 2022, we received approval from the FDA for the Eversense E3 CGM System. The approval for our third-generation sensor, with proprietary sacrificial boronic acid (“SBA”) technology doubles the sensor life to six months with MARD of 8.5%. Ascensia began commercializing Eversense E3 in the second quarter of 2022.

~~Financial Overview~~

~~Revenue~~European Commercialization of Eversense

~~During the three and nine months ended~~In September ~~30,~~ 2017, we ~~generated~~received the CE mark for Eversense XL which indicates that the product may be sold freely in any part of the European Economic Area (“EEA”). The Eversense XL is indicated for a sensor life of up to 180 days. Eversense XL began commercialization in Europe in the fourth quarter of 2017. All such commercialization and marketing activities remain subject to applicable government approvals.

In May 2016, we entered into a distribution agreement with Roche. Pursuant to the agreement, as amended, we had granted Roche the exclusive right to market, sell and distribute Eversense in Europe, Middle East and Asia (“EMEA”), excluding Scandinavia and Israel. In addition, Roche had exclusive distribution rights in 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions. Roche was obligated to purchase from us specified minimum volumes of Eversense XL CGM components at pre-determined prices. On December 12, 2019, we further amended the distribution agreement to lower minimum volumes for 2020 and increase pricing for the remaining period of the contract. On November 30, 2020 we entered into a final amendment and settlement agreement with Roche to facilitate the transition of distribution to Ascensia as sales concluded on January 31, 2021, including final purchases, and transition support activities. The distribution rights under the agreement expired January 31, 2021.

Financial Overview

Revenue

We generate product revenue from sales of the Eversense system ~~in Europe pursuant~~and related components and supplies to distribution agreements with Roche and Rubin, and we expect to continue marketing Eversense in additional European countries during 2017 and begin marketing Eversense XL in selected European countries by the end of 2017. ~~We expect our revenue from European product sales will increase as we ramp up our commercialization efforts~~Ascensia, through the ~~remainder of 2017~~Commercialization Agreement, third-party distributors in the European Union and ~~into 2018. In the future, subject~~ to ~~regulatory approval, we also intend to seek to commercialize the Eversense system~~strategic fulfillment partners in the United States (collectively “Customers”), who then resell the products to health care providers and patients. We are paid for our sales directly to the Customers, regardless of whether or not the Customers resell the products to health care providers and patients.

Revenue from product sales is recognized at a point in time when the Customers obtain control of our product based upon the delivery terms as ~~well as other international markets. If~~defined in the contract at an amount that reflects the consideration which we ~~fail~~expect to ~~successfully commercialize or are otherwise unable to complete~~receive in exchange for the ~~development~~product. Contracts with our distributors contain performance obligations, mostly for the supply of goods, and is typically satisfied upon transfer of control of the ~~Eversense system, our ability~~product. Customer contracts do not include the right to ~~generate future~~return unless there is a product issue, in which case we may provide replacement product. Product conformity guarantees do not create additional performance obligations and are accounted for as warranty obligations in accordance with guarantee and loss contingency accounting guidance.

Our contracts may contain some form of variable consideration such as prompt-pay discounts, tier-volume price discounts and for the Ascensia commercial agreement, revenue share. Variable consideration, such as discounts and prompt-pay incentives, are treated as a reduction in revenue and ~~our results~~variable considerations, such as revenue share, is treated as an addition in revenue when the product sale is recognized. The amount of ~~operations~~variable consideration that is included in the transaction price may be constrained and ~~financial position, will be adversely affected~~.

~~Cost of Sales~~

~~We utilize contract manufacturers~~is included in revenue only to ~~produce~~ the ~~Eversense system. Cost of sales consists primarily~~extent that it is probable that a significant reversal in the amount of the ~~components~~cumulative revenue recognized will not occur in a future period, when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint requires the use of management judgment. Depending on the variable consideration, we develop estimates for the expected value based on the terms of the ~~Eversense system~~agreements, historical data, geographic mix, reimbursement rates, and assembly, as well as reserves for warranty costs. Other cost of sales includes distribution-related expenses such as logistics and shipping costs of Eversense to Roche and Rubin for distribution in various regions in Europe, the Middle East and Africa. We calculate gross margin as revenue less costs of sales divided by revenue. We expect our overall gross margin to improve over the long term, as our sales increase and we have more opportunities to spread our costs over larger production volumes. However, our gross margins may fluctuate from period to period.market conditions.

~~Sales and Marketing~~

Sales and marketing expenses consist primarily of salaries and other related costs, including stock‑based compensation, for personnel who perform sales and marketing functions. Other significant costs include promotional materials and tradeshow expenses.

~~We anticipate that our sales and marketing expenses will increase in the future as we continue to expand our commercialization of the Eversense system.~~

~~Research and Development~~

Research and development expenses consist of expenses incurred in performing research and development activities in developing the Eversense system, including our clinical trials and feasibility studies. Research and development expenses include compensation and benefits for research and development employees including stock‑based compensation, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, costs related to regulatory operations, fees paid to contract research organizations and other consultants, and other outside expenses. Research and development costs are expensed as incurred.

We have incurred significant research and development expenses from inception, with the substantial majority of the expenses spent on the development of Eversense. We expect to continue to commit significant resources to continue to develop Eversense and future product enhancements and to conduct ongoing and future clinical trials. We expect that our overall research and development expenses will continue to increase in absolute dollars, but to decline as a percentage of total expenses as we expand the commercialization of Eversense.

~~General and Administrative~~

General and administrative expenses consist primarily of salaries and other related costs, including stock‑based compensation, for personnel in our executive, finance, accounting, business development, and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and consulting services.

Our general and administrative expenses have increased, and we expect them to continue to increase in the future, as a result of operating as a public company. These increases include increased costs related to the hiring of additional personnel and increased fees to outside consultants, lawyers and accountants as well as expenses related to

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Contract assets consist of unbilled receivables from customers and are recorded at net realizable value and relate to the revenue share variable consideration from the Ascensia commercial agreement.

Concentration of Revenue and Customers

For the three months ended March 31, 2022 and 2021, we derived 88% and 81%, respectively, of our total revenue from one customer, Ascensia. Revenues for these corresponding periods represent purchases for sensors, transmitters and miscellaneous Eversense system components.

Revenue by Geographic Region

The following table sets forth net revenue derived from our two primary geographical markets, the United States and outside of the United States, based on the geographic location to which we deliver the product, for three months ended March 31, 2022 and 2021:


	March 31, 2022				March 31, 2021
			%				%
(Dollars in thousands)	Amount		of Total		Amount		of Total
Revenue, net:
Outside of the United States	$	1,714	69.1	%	$	2,533	89.0	%
United States		767	30.9			313	11.0
Total	$	2,481	100.0	%	$	2,846	100.0	%

Accounts Receivable

Accounts receivable consist of amounts due from our Customers and are recorded at net realizable value, which may include reductions for allowances for doubtful accounts at the time potential collection risk is identified or for promotional or prompt-pay discounts offered. We do not have a history of collectability concerns and no allowance for uncollectible accounts was recorded as of March 31, 2022 and December 31, 2021.

Use of Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. In our accompanying unaudited consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation allowances, derivative assets and liabilities, obsolete inventory, warranty obligations, variable consideration related to revenue, depreciable lives of property and equipment, and accruals for clinical study costs, which are accrued based on estimates of work performed under contract. We considered COVID-19 related impacts to our estimates, as appropriate, within our unaudited condensed consolidated financial statements and there may be changes to those estimates in future periods due to the uncertainties surrounding the severity and duration of the COVID-19 pandemic. Actual results could differ from those estimates; however, we do not believe that such differences would be material.

Recent Accounting Pronouncements

Recently Adopted

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contract in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). This new guidance is intended to reduce the complexity of accounting for convertible instruments. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments. Entities may adopt ASU 2020-06 using either partial retrospective or fully retrospective method of transition. ASU 2020-06 is effective for public business entities for fiscal

~~maintaining compliance with NYSE American listing rules~~Table of Contents

years beginning after December 15, 2021, including interim periods within those fiscal years. We adopted this guidance as of January 1, 2022 and ~~SEC requirements, insurance,~~its adoption did not have a material impact on the consolidated financial statements and ~~investor relations costs. These expenses may further increase when we no longer qualify~~related disclosures.

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires entities to record expected credit losses for certain financial instruments, including trade receivables, as an ~~“emerging growth company” under~~allowance that reflects the ~~Jumpstart Our Business Startups Act~~entity's current estimate of ~~2012,~~credit losses expected to be incurred. For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment. We currently hold investments in available-for-sale securities. We have not historically experienced collection issues or ~~the JOBS Act, which will require us~~bad debts with trade receivables. Accordingly, we do not expect this to ~~comply with certain reporting requirements from which we are currently exempt.~~

~~Other Income (Expense), Net~~

~~Interest income consists of interest earned~~have a significant impact on our ~~cash equivalents~~consolidated financial statements and ~~interest expense primarily consists~~related disclosures at this time. Since we qualified as a smaller reporting company as of ~~interest expense~~June 28, 2019, we maintain our status as a smaller reporting company for the adoption of this standard. As such, we will adopt this guidance on the secured notes, or the Notes, we issued to Oxford in connection with our original Loan and Security Agreement in July and December 2014 and the Notes we issued to Oxford and SVB in connection with our Amended and Restated Loan and Security Agreement in June 2016, November 2016 and March 2017. We refer to Oxford and SVB together as the Lenders. This interest expense primarily consists of (i) contractual interest on the Notes, (ii) amortization of debt discount related to warrants, or the warrants, that we issued to the Lenders in connection with the Notes, and (iii) the accrual into interest expense of a final payment obligation that we are required to pay to the Lenders at maturity of the Notes. effective date for smaller reporting companies, January 1, 2023.

Results of Operations

Comparison of the ~~Three Months Ended September 30, 2017~~three months ended March 31, 2022 and ~~2016~~2021

The following table sets forth our results of operations for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~2021 (in thousands):


							Three Months Ended
							March 31,				Period-to-
							2022		2021		Period Change

	Three Months Ended
	September 30,				Period-to-
	2017		2016		Period Change
	(in thousands)
Revenue	$	2,097	$	37	$	2,060
							(in thousands)					(in thousands)
Revenue, net							$	292	$	487	$	(195)
Revenue, net - related parties								2,189		2,359		(170)
Total revenue								2,481		2,846		(365)
Cost of sales		2,957		114		2,843		1,954		2,320		(366)
Gross profit		(860)		(77)		(783)		527		526		1


Expenses:
Sales and marketing expenses		2,089		733		1,356		1,509		1,613		(104)
Research and development expenses		9,765		6,883		2,882		7,804		5,255		2,549
General and administrative expenses		3,891		2,819		1,072		6,374		4,974		1,400
Operating loss		(16,605)		(10,512)		(6,093)		(15,160)		(11,316)		(3,844)
Other income (expense), net:
Other (expense) income, net:
Interest income		129		35		94		93		9		84
Gain (Loss) on fair value adjustment of option								21,701		(52,675)		74,376
Gain on extinguishment of debt and option								—		330		(330)
Interest expense		(915)		(502)		(413)		(4,494)		(4,058)		(436)
Other income		12		92		(80)
Total other expense, net		(774)		(375)		(399)
Net loss	$	(17,379)	$	(10,887)	$	(6,492)
Gain (Loss) on change in fair value of derivatives								84,569		(180,899)		265,468
Impairment cost, net								30		(782)		812
Other expense								(21)		(123)		102
Total other (expense) income, net								101,878		(238,198)		340,076
Net income (loss)							$	86,718	$	(249,514)	$	336,232

~~Revenue~~

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Revenue, net

Our net revenue ~~increased~~decreased to ~~$2.1~~$2.5 million for the three months ended September 30, 2017, compared to $37,000 for the three months ended September 30, 2016. This increase was due to a higher number of shipments of Eversense to Rubin and Roche for distribution in Europe during the three months ended September 30, 2017.

~~Cost of sales~~

Our cost of sales increased to $3.0 million for the three months ended September 30, 2017, compared to $114,000 for the three months ended September 30, 2016. This increase was due to increased manufacturing and distribution of Eversense to Roche and Rubin for distribution in Europe during the three months ended September 30, 2017.

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Our gross profit was $(0.9) million and $(77,000) for the three months ended September 30, 2017 and 2016, respectively. Gross profit as a percentage of revenue, or gross margin, was (41.0)% in the three months ended September 30, 2017.

~~Sales and marketing expenses~~

Sales and marketing expenses were $2.1 million for the three months ended September 30, 2017, compared to $0.7 million for the three months ended September 30, 2016, an increase of $1.4 million. The $1.4 million increase was primarily due to a $0.7 million increase in salaries, bonuses and payroll related costs for additional headcount, and a $0.7 million increase in other sales and general marketing expenses to support our European distribution of Eversense as well as in preparation for our potential U.S. launch of Eversense.

~~Research and development expenses~~

Research and development expenses were $9.8 million for the three months ended September 30, 2017, compared to $6.9 million for the three months ended September 30, 2016, an increase of $2.9 million. The increase of $2.9 million was primarily due to a $0.9 million increase in salaries, bonuses and payroll related costs for additional headcount and a $2.0 million increase in research and development expenses related to development of future generations of Eversense, including conducting a pediatric clinical trial in Canada and additional feasibility trials in Romania.

~~General and administrative expenses~~

~~General and administrative expenses were $3.9 million for the three months ended September 30, 2017,~~March 31, 2022, compared to $2.8 million for the three months ended ~~September 30, 2016, an increase of $1.1 million. The increase~~March 31, 2021. This decrease was ~~primarily~~ due to ~~a $0.4~~lower orders from Ascensia compared to the first quarter of 2021 when Ascensia began to commercialize our product.

Cost of sales

Our cost of sales decreased to $2.0 million increase in salaries, bonuses and payroll related costs for additional headcount, a $0.2 million increase in recruiting and relocation costs to support hiring efforts, and a $0.5 million increase in legal and other general and administrative costs.

~~Total other expense, net~~

~~Total other expense, net,~~ for the three months ended ~~September 30, 2017 and 2016 was $0.8 million and $0.4 million, respectively, consisting primarily of interest expense on our debt facilities.~~

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~~Comparison of the Nine Months Ended September 30, 2017 and 2016~~

~~The following table sets forth our results of operations for the nine months ended September 30, 2017 and 2016.~~

Nine Months Ended

September 30,

Period-to-

2017

2016

Period Change

(in thousands)

Revenue

$
3,464

$
56

$
3,408

Cost of sales

5,716

148

5,568

Gross profit

(2,252)

(92)

(2,160)

Expenses:

Sales and marketing expenses

4,478

2,001

2,477

Research and development expenses

22,368

20,838

1,530

General and administrative expenses

11,545

10,060

1,485

Operating loss

(40,643)

(32,991)

(7,652)

Other income (expense), net:

Interest income

187

69

118

Interest expense

(2,365)

(1,045)

(1,320)

Other income (expense)

(5)

3

(8)

Total other expense, net

(2,183)

(973)

(1,210)

Net loss

$
(42,826)

$
(33,964)

$
(8,862)

~~Revenue~~

~~Our revenue increased~~March 31, 2022, compared to ~~$3.5~~$2.3 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021. The decrease was as a result of lower orders from Ascensia compared to ~~$56,000~~the first quarter of 2021 when Ascensia began to commercialize our product.

Gross profit was comparable for the ~~nine~~three months ended ~~September 30, 2016. This increase was due to a higher number of shipments of Eversense to Rubin~~March 31, 2022 and ~~Roche for distribution in Europe during the nine months ended September 30, 2017.~~2021.

~~Cost of sales~~

Our cost of sales increased to $5.7 million for the nine months ended September 30, 2017, compared to $148,000 for the nine months ended September 30, 2016. This increase was due to increased manufacturing and distribution of Eversense to Roche and Rubin for distribution in Europe during the nine months ended September 30, 2017.

~~Our gross profit was $(2.3) million and $(92,000) for the nine months ended September 30, 2017 and 2016, respectively. Gross margin was (65.0)% in the nine months ended September 30, 2017.~~

Sales and marketing expenses

Sales and marketing expenses were ~~$4.5~~$1.5 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$2.0~~$1.6 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021, a decrease of $0.1 million. The decrease was primarily the result of lower sales software costs as Ascensia assumed commercialization responsibilities.

Research and development expenses

Research and development expenses were $7.8 million for the three months ended March 31, 2022, compared to $5.3 million for the three months ended March 31, 2021, an increase of $2.5 million. The ~~$2.5 million~~ increase was ~~primarily~~ due to a $1.1 million increase in salaries, bonuses and payroll related costs for additional headcount, and a $1.4 million increase in other sales and general marketing expenses, primarily driven by $0.9 million of travel and consulting expenses, to support European distribution of Eversense.

~~Research and development expenses~~

~~Research and development expenses were $22.4 million for the nine months ended September 30, 2017, compared to $20.8 million for the nine months ended September 30, 2016,~~clinical studies activities, an increase of ~~$1.5 million. The~~$0.8 million in personnel related costs due to the expansion of our R&D workforce and an increase of ~~$1.5~~$0.6 million ~~was primarily due to a $1.9 million increase in salaries, bonuses~~for consulting, contract fabrication and payroll related costs for additional headcount and a $1.0 million increase in expenses related to development of future generations of Eversense, partially offset by a $1.4 million decrease in clinical and consulting expenses related to the completion of our U.S. pivotal trial in 2016.other R&D support services.

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General and administrative expenses

General and administrative expenses were ~~$11.5~~$6.4 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$10.1~~$5.0 million for ~~the nine~~three months ended ~~September 30, 2016,~~March 31, 2021, an increase of $1.4 million. The increase was due primarily to an increase of $0.9 million in other G&A costs to include recruiting, consultants and franchise tax expense. The increase was also due to higher salaries and related expenses of $0.5 million.

Total other (expense) income, net

Total other income, net, was $101.9 million for the three months ended March 31, 2022, compared to other expense, net, of $238.2 million for the three months ended March 31, 2021, a change of $340.1 million. The change was primarily due to a ~~$0.7~~$265.5 million change in fair value of derivatives and a $74.4 million change in fair value of option, a $0.8 million change in impairment cost related to the option and a decrease of $0.1 million in other expense, partially offset by $0.3 million lower gain on extinguishment of debt and a $0.4 million increase in ~~recruiting and relocation costs, a $0.4 increase in information and technology spending for services to support our operations, and a $0.3 million increase in legal and general spending.~~interest expense.

~~Total other expense, net~~

~~Total other expense, net, for the nine months ended September 30, 2017 and 2016 was $2.2 million and $1.0 million, respectively, consisting primarily of interest expense on our debt facilities.~~

Liquidity and Capital Resources

Sources of Liquidity

From our founding in 1996 until 2010, we devoted substantially all of our resources to researching various sensor technologies and platforms. Beginning in 2010, we narrowed our focus to ~~designing,~~ developing and refining a commercially viable glucose monitoring system. However, to date, we have not generated any significant revenue from product sales. We have incurred substantial losses and cumulative negative cash flows from operations since our inception in October 1996. We have never been profitable and our net losses were ~~$17.4~~$302.5 million, $175.2 million, and ~~$10.9~~$115.5 million for the ~~three months~~

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years ended ~~September 30, 2017~~December 31, 2021, 2020 and ~~2016, respectively, and $42.8 million and $34.0 million for the nine months ended September 30, 2017 and 2016,~~2019, respectively. As of ~~September 30, 2017, our~~March 31, 2022, we had an accumulated deficit ~~totaled $247.5~~of $864.3 million.

To date, we have funded our operations principally through the issuance of preferred stock, common stock, convertible notes and debt. As of ~~September 30, 2017,~~March 31, 2022, we had cash, cash equivalents and marketable debt securities of $166.9 million.

In November 2021, we entered into an Open Market Sale Agreement (the “2021 Sales Agreement”) with Jefferies LLC (“Jeffries”), under which we could offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $150.0 million through Jeffries as our sales agent in an “at the market” offering. Jeffries will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jeffries under the 2021 Sales Agreement. As of March 31, 2022, we received $8.0 million in net proceeds from the sale of 3,077,493 shares of our common stock under the 2021 Sales Agreement.

In November 2019, we entered into an Open Market Sale Agreement (the “2019 Sales Agreement”) with Jefferies, under which we could offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million through Jeffries as our sales agent in an “at the market” offering. In June 2021, we received $48.4 million in net proceeds from the sale of 12,830,333 shares of our common stock utilizing the full capacity under the 2019 Sales Agreement.

On January 21, 2021, we entered into an underwriting agreement, which was subsequently amended and restated on the same day (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC, as representative of the underwriters (the “Underwriters”), to issue and sell 51,948,052 shares of common stock, in an underwritten public offering pursuant to effective registration statements on Form S-3, including a related prospectus and prospectus supplement, in each case filed with the Securities and Exchange Commission (the “Offering”). The price to the public in the Offering was $1.925 per share of common stock. The Underwriters agreed to purchase the shares from us pursuant to the Underwriting Agreement at a price of $1.799875 per share and the Company also agreed to reimburse them for customary fees and expenses. The initial closing of the Offering occurred on January 26, 2021. Subsequent to the initial closing, the Underwriters exercised their option to purchase an additional 7,792,207 shares of Common Stock. Total net proceeds from the Offering were $106.1 million after deducting underwriting discounts and commissions and estimated offering expenses.

On January 17, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional purchasers (the “Purchasers”), pursuant to which we sold to the Purchasers, in a registered direct offering (the “Registered Direct Offering”), an aggregate of 40,000,000 shares (the “Shares”) of common stock, $0.001 par value per share. The Shares were sold at a purchase price of $1.25 per share for aggregate gross proceeds to the Company of $50 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. The Shares were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on November 27, 2019. The net proceeds to the Company from the Registered Direct Offering, after deducting fees and expenses and the estimated offering expenses payable by us are approximately $46.1 million.

On November 9, 2020, we entered into an equity line agreement, (“Equity Line Agreement”), with Energy Capital, LLC (“Energy Capital”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital is committed to purchase up to an aggregate of $12.0 million of shares of our newly designated series B convertible preferred stock (“the Series B Preferred Stock”), at our request from time to time during the 24-month term of the Equity Line Agreement. There have been no issuances of Series B Preferred Stock as of March 31, 2022.

Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including that we have less than $8.0 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), we have the right, in our sole discretion, to present Energy Capital with a purchase notice (“Regular Purchase Notice”) directing Energy Capital (as principal) to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares) once per month, up to an aggregate of $12.0 million of our Series B Preferred Stock at a per share price (the “Purchase Price”), equal to $1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into common stock, beginning six

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months after the date of its issuance, at a conversion price of $0.3951 per share. The Equity Line Agreement provides that we shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of the common stock on the NYSE American is less than $0.25 without the approval of Energy Capital.

Concurrently with entry into the Equity Line Agreement, we issued a warrant to Energy Capital, exercisable beginning May 9, 2021, to purchase up to 10,000,000 shares of common stock at an exercise price of $0.3951 per share, (the “Warrant”). The Warrant was exercised in full in February 2022.

On August 9, 2020, we entered into a financing agreement with Ascensia pursuant to which we issued $35.0 million in aggregate principal amount of Senior Secured Convertible Notes due on October 31, 2024 (the “PHC Notes”), to Ascensia’s parent company, PHC Holdings Corporation (“PHC”), on the Closing Date. We also issued PHC 2,941,176 shares of common stock to PHC as a financing fee. We also have the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining approval for the 180-day Eversense product for marketing in the United States before such date. Upon the closing of the PHC Notes, we prepaid in full the First Lien Notes, issued and sold pursuant to the Highbridge Loan Agreement, in the amount of approximately $17.6 million.

Additionally, on August 9, 2020, we entered into a Stock Purchase Agreement with Masters Special Solutions, LLC and certain affiliates thereof (“Masters”), pursuant to which we issued and sold to Masters 3,000 shares of convertible preferred stock, designated as Series A Preferred Stock (the “Series A Preferred Stock”), at a price of $1,000.00 per share in an initial closing. Masters also had the option to purchase up to an additional 27,000 shares of Series A Preferred Stock at a price of $1,000.00 per share in subsequent closings, subject to the terms and conditions of the Stock Purchase Agreement, as amended, through January 11, 2021. In January 2021, Masters and its assignees purchased in aggregate an additional 22,783 shares of Series A Preferred Stock, resulting in additional gross proceeds of $22.8 million. Each share of Series A Preferred Stock is initially convertible into a number of shares of common stock equal to $1,000 divided by the conversion price of $0.476 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. All shares of Series A Preferred Stock have been converted to common stock.

We believe that these agreements provide the financial resources and mutual commitment to support the growth of Eversense and specifically for us, the manufacturing of Eversense and continued product development, including the U.S. launch of Eversense E3. The timing and success of these collaborations and financings are dependent on certain events occurring in accordance with our plans, and may be influenced by uncontrollable external factors, including restrictions or impacts of COVID-19. Management has concluded that based on our current operating plans, existing cash and cash equivalents and ~~marketable securities~~cash flows from our future operations will be sufficient to meet our anticipated operating needs through 2023.

Common Stock

In November 2021, we entered into the 2021 Sales Agreement with Jefferies, under which we could offer and sell, from time to time, at our sole discretion, shares of ~~$52.7 million.~~ our common stock having an aggregate offering price of up to $150.0 million through Jefferies as the sales agent in an “at the market” offering. Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement. During the three months ended March 31, 2022, we received $8.0 million in net proceeds from the sale of 3,077,493 shares of our common stock under the 2021 Sales Agreement.

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Indebtedness

Term Loans

PPP Loan

On April 22, 2020, we received $5.8 million in loan funding from the PPP pursuant to the CARES Act, as amended by the Flexibility Act, and administered by the Small Business Administration (“SBA”). The unsecured loan (the “PPP Loan”) is evidenced by the PPP Note dated April 21, 2020 (the “PPP Note”), in the principal amount of $5.8 million with Silicon Valley Bank (“SVB”).

Under the terms of the ~~Amended~~PPP Note and ~~Restated~~the PPP Loan, interest accrues on the outstanding principal at a rate of 1.0% per annum. The term of the PPP Note is two years, though it may be payable sooner in connection with an event of default under the PPP Note. We began to make equal monthly payments of principal and ~~Security Agreement~~interest beginning in the third quarter of 2021. As of March 31, 2022, the outstanding balance, including accrued interest, of the PPP Note was $0.7 million.

The PPP Note may be prepaid in part or in full, at any time, without penalty. The PPP Note provides for certain customary events of default, including (i) failing to make a payment when due under the PPP Note, (ii) failure to do anything required by the PPP Note or any other loan document, (iii) defaults of any other loan with ~~Oxford~~SVB, (iv) failure to disclose any material fact or make a materially false or misleading representation to SVB or SBA, (v) default on any loan or agreement with another creditor, if SVB believes the default may materially affect our ability to pay the PPP Note, (vi) failure to pay any taxes when due, (vii) becoming the subject of a proceeding under any bankruptcy or insolvency law, having a receiver or liquidator appointed for any part of our business or property, or making an assignment for the benefit of creditors, (viii) having any adverse change in financial condition or business operation that SVB believes may materially affect our ability to pay the PPP Note, (ix) if we reorganize, merge, consolidate, or otherwise change ownership or business structure without SVB’s prior written consent, or (x) becoming the subject of a civil or criminal action that SVB believes may materially affect our ability to pay the PPP Note. Upon the occurrence of an event of default, SVB has customary remedies and ~~SVB,~~may, among other things, require immediate payment of all amounts owed under the PPP Note, collect all amounts owing from us, and file suit and obtain judgment against us.

Convertible Notes

The following table summarizes our outstanding convertible notes at March 31, 2022:


				Aggregate				Initial Conversion		Conversion Price
Convertible	Issuance			Principal		Maturity		Rate per $1,000		per Share of
Note	Date	Coupon		(in millions)		Date		Principal Amount		Common Stock
2023 Notes	January 2018		5.25%	$	15.7		February 1, 2023		294.1176	$	3.40
2025 Notes	July 2019		5.25%	$	51.2		January 15, 2025		757.5758	$	1.32
PHC Notes	August 2020		9.50%	$	35.0		October 31, 2024		1867.4136	$	0.53

2023 Notes

In the first quarter of 2018, we ~~may borrow~~issued $53.0 million in aggregate principal amount of senior convertible notes that will mature on February 1, 2023, (the “2023 Notes”), of which $15.7 million in aggregate principal remains outstanding as of March 31, 2022, after some of the holders exchanged their 2023 Notes for 2025 Notes, as defined below, in July 2019.

2025 Notes

In July 2019, we issued $82.0 million in aggregate principal amount of senior convertible notes that will mature on January 15, 2025 (the “2025 Notes”), unless earlier repurchased or converted. In connection with an exchange on April 24, 2020, $24.0 million in aggregate principal of Highbridge Capital Management, LLC’s (“Highbridge”)

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outstanding 2025 Notes were exchanged for (i) $15.7 million aggregate principal amount of Second Lien Notes (“Second Lien Notes”), (ii) 11,026,086 shares of our common stock, (iii) warrants to purchase up to 4,500,000 shares of our common stock at an exercise price of $0.66 per share, and (iv) $0.3 million in accrued and unpaid interest on the 2025 Notes being exchanged (the “Exchange”).

For additional information on the 2025 Notes and the 2023 Notes, see Note 8—Notes Payable, Preferred Stock and Stock Purchase Warrants in the accompanying unaudited consolidated financial statements.

PHC Notes

On August 9, 2020, we entered into a note purchase agreement with PHC (the “Note Purchase Agreement”), pursuant to which we agreed to borrow $35.0 million in aggregate principal through the issuance and sale of PHC Notes on or prior to August 14, 2020. The PHC Notes will be senior secured obligations and will be guaranteed on a senior secured basis by our wholly owned subsidiary, Senseonics, Incorporated. Interest at the initial annual rate of 9.5% is payable semi-annually in cash or, at our option, payment in kind. The interest rate will decrease to 8.0% beginning in April 2022 because we obtained FDA approval for the 180-day Eversense E3 product for marketing in the United States. The maturity date for the PHC Notes will be October 31, 2024, provided that the maturity date will accelerate if we have not repaid our Second Lien Notes (other than an aggregate principal amount of ~~$30.0 million. Under this debt facility, we initially borrowed an aggregate of $15 million from Oxford and SVB on June 30, 2016. We used $11 million~~up to $1.0 million) by 91 days prior to the maturity of the ~~$15 million~~Second Lien Notes.

PHC will be entitled to ~~retire existing loans with Oxford,~~convert the PHC Notes to common stock at a conversion rate of 1,867.4136 shares per $1,000 principal amount of the PHC Notes, equivalent to a conversion price of approximately $0.54 per share, subject to specified anti-dilution adjustments, including adjustments for our issuance of equity securities on or prior to April 30, 2022 below the conversion price. In addition, following a ~~final payment fee~~notice of ~~$1 million. In each of November 2016 and March 2017,~~redemption or certain corporate events that occur prior to the maturity date, we ~~borrowed an additional $5 million from Oxford and SVB upon achieving~~will, in certain ~~milestones. The agreement provides for monthly payments of interest only~~circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such notice of redemption or corporate event. In certain circumstances, we will be required to pay cash in lieu of delivering make whole shares unless we obtain stockholder approval to issue such shares.

Subject to specified conditions, on or after October 31, 2022, the PHC Notes are redeemable by us if the closing sale price of the common stock exceeds 275% of the conversion price for a specified period of 18time and subject to certain conditions upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount, plus any accrued but unpaid interest. On or after October 31, 2023, the PHC Notes are redeemable by us upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount, plus any accrued but unpaid interest, plus a call premium of 130% if redeemed at least six months ~~followed by~~prior to the maturity date or a call premium of 125% if redeemed within six months of the maturity date.

The Note Purchase Agreement contains customary terms and covenants, including financial covenants, such as operating within an ~~amortization period~~approved budget and achieving minimum revenue and liquidity targets, and negative covenants, such as limitations on indebtedness, liens, mergers, asset transfers, certain investing activities and other matters customarily restricted in such agreements. Most of ~~30 months.~~these restrictions are subject to certain minimum thresholds and exceptions. The Note Purchase Agreement also contains customary events of default, after which the PHC Notes be due and payable immediately, including defaults related to payment compliance, material inaccuracy of representations and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, judgments against us, change of control or delisting events, termination of any guaranty, governmental approvals, and lien priority.

Funding Requirements and Outlook

Our ability to generate revenue and achieve profitability depends on the successful commercialization and adoption of our ~~completion of the development of~~ Eversense CGM systems by diabetes patients and healthcare providers, along with future product ~~candidates and obtaining of necessary~~development, regulatory approvals, ~~for the manufacture, marketing~~ and ~~sales of those products.~~post-approval requirements. These activities, including our ~~planned significant research~~ongoing focus to grow covered lives through positive insurance payor policy decisions and continued development ~~efforts,~~of Eversense 365-day product, will require significant uses of working capital through ~~2017~~2022 and beyond. ~~Upon the completion~~

Table of the audit of our consolidated financial statements for the year ended December 31, 2016, we did not have sufficient cash to fund our operations beyond the third quarter of 2017 without additional financing and, therefore, we concluded there was substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph regarding this uncertainty in its report on those consolidated financial statements. The financial information throughout this Quarterly Report and the unaudited consolidated financial statements included elsewhere in this Quarterly Report have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and these statements do not include any adjustments that may result from the outcome of this uncertainty.Contents

We expect ~~our~~that existing cash, cash equivalents and ~~marketable securities available for sale as~~cash flows from our future operations will be sufficient to meet the Company’s current operating plans through 2023. As part of ~~September 30, 2017 will enable us to fund~~ our operations into the third quarter of 2018, without receiving additional funding. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Additionally, the process of clinical and regulatory development of medical devices is costly, and the timing of progress of these efforts is uncertain.

~~We anticipate that~~liquidity strategy, we will continue to ~~incur losses for~~monitor our capital structure and operating plans and we may access the ~~foreseeable future. We expect that our research and~~

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~~development expenses and administrative expenses will continue to increase and, as a result, we will need additional~~ capital to fund our operations. Until such time, if ever, as we can generate substantial revenue, we expect to finance our cash needs through a combination of equity offerings, which may include additional follow-on offerings or through an at-the-market facility, debt financings and revenue from potential research and development and other collaboration agreements. To the extent that we raise additional capital through the future sale of equitymarkets or debt markets for additional funding if the ~~ownership interest of~~opportunity arises to enhance our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds in the future, we may have to relinquish valuable rightscapital structure for changes to our ~~technologies, future revenue streams or grant licenses on terms that may not be favorable~~operating plans, for financing strategic initiatives and to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant licenses to develop and market products that we would otherwise prefer to develop and market ourselves.provide financial flexibility.

~~Indebtedness~~

On June 30, 2016, we entered into an Amended and Restated Loan and Security Agreement with the Lenders. Pursuant to the Amended and Restated Loan and Security Agreement, we may potentially borrow up to an aggregate principal amount of $30.0 million in the following four tranches: $15.0 million, or the Tranche 1 Term Loan; $5.0 million, or the Tranche 2 Term Loan; $5.0 million, or the Tranche 3 Term Loan; and $5.0 million, or the Tranche 4 Term Loan. We refer to each of the tranches as a Term Loan, and collectively, the Term Loans. The funding conditions for the Tranche 1 Term Loan were satisfied as of June 30, 2016. Therefore, we issued secured notes to the Lenders for aggregate gross proceeds of $15.0 million, or the Notes, on June 30, 2016. We used approximately $11.0 million from the proceeds from the Notes to repay the outstanding balance under our previously existing Loan and Security Agreement with Oxford, dated as of July 31, 2014, including the applicable final payment fee due thereunder of $1 million. On November 22, 2016, the funding conditions for the Tranche 2 Term Loan were satisfied; therefore we issued secured notes to the Lenders for aggregate gross proceeds of $5.0 million. On March 29, 2017, the funding conditions for the Tranche 3 Term Loan were satisfied; therefore we issued secured notes to the Lenders for aggregate gross proceeds of $5.0 million. We may borrow the Tranche 4 Term Loan on or before December 31, 2017 if we receive PMA approval from the FDA for Eversense, and achieve trailing six-month revenue for the applicable period of measurement of at least $4.0 million. The maturity date for all Term Loans is June 1, 2020, or the Maturity Date.

The Term Loans bear interest at a floating annual rate of 6.31% plus the greater of (i) 90-day U.S. Dollar LIBOR reported in the Wall Street Journal or (ii) 0.64%, provided that the minimum floor interest rate is 6.95%, and require monthly payments. The monthly payments initially consist of interest-only. After 18 months, the monthly payments will convert to payments of principal and monthly accrued interest, with the principal amount being amortized over the ensuing 30 months.

We may elect to prepay all Term Loans prior to the Maturity Date subject to a prepayment fee equal to 3.00% if the prepayment occurs within one year of the funding date of any Term Loan, 2.00% if the prepayment occurs during the second year following the funding date of any Term Loan, and 1.00% if the prepayment occurs more than two years after the funding date of any Term Loan and prior to the Maturity Date.

The Amended and Restated Loan and Security Agreement contains customary events of default, including bankruptcy, the failure to make payments when due, the occurrence of a material impairment on the Lenders’ security interest over the collateral, a material adverse change, the occurrence of a default under certain other agreements entered into by us, the rendering of certain types of judgments against us, the revocation of certain of our government approvals, violation of covenants, and incorrectness of representations and warranties in any material respect. Upon the occurrence of an event of default, subject to specified cure periods, all amounts owed by us would begin to bear interest at a rate that is 5.00% above the rate effective immediately before the event of default, and may be declared immediately due and payable by Lenders.

Pursuant to the Amended and Restated Loan and Security Agreement, we also issued to the Lenders 10‑year stock purchase warrants to purchase an aggregate of 116,581, 63,025 and 80,645 shares of common stock with an exercise price of $3.86, $2.38, and $1.86 per share.

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The Notes are collateralized by all of our consolidated assets other than our intellectual property. The Notes also contain certain restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions, as well as financial reporting requirements. We incurred issuance costs related to the Notes of approximately $568,648 that are being amortized as additional interest expense over the term of the Notes using the effective interest method. The fair value of the stock purchase warrants, which was estimated to be $526,209, was recorded as a discount to the Notes, which is also being amortized as additional interest expense over the term of the Notes using the effective interest method.

At maturity (or earlier prepayment), we are also required to make a final payment equal to 9.00% of the aggregate principal balances of the funded Term Loans. This fee is being accrued as additional interest expense over the term of the Notes using the effective interest method. In the event that we achieve the requirements to borrow the Tranche 4 Term Loan, and elect not to borrow that tranche, we are obligated to pay the Lenders a non-utilization fee of 2.00% of the undrawn amount.

Cash Flows

The following is a summary of cash flows for each of the periods set forth ~~below.~~below (in thousands).


	Nine Months Ended
	September 30,
	2017		2016
	(in thousands)

					Three Months Ended
					March 31,
					2022		2021
Net cash used in operating activities	$	(39,450)	$	(27,797)	$	(20,159)	$	(16,258)
Net cash used in investing activities		(15,864)		(9,628)
Net cash provided by (used in) investing activities						19,666		(11)
Net cash provided by financing activities		72,050		49,982		6,043		176,674
Net increase in cash and cash equivalents	$	16,736	$	12,557	$	5,550	$	160,405

Net cash used in operating activities

Net cash used in operating activities was ~~$39.5~~$20.2 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022 and consisted ~~primarily~~ of an $84.6 million change in fair value of derivatives on convertible notes, a ~~net loss~~$21.7 million gain on fair value adjustment of ~~$42.8 million~~the option, and a net ~~decrease~~change in operating assets and liabilities of ~~$0.1~~$5.3 million, (consisting of an increase in accounts payable, accrued expenses and interest of $5.6 million, net of an increase in accounts receivable, inventory, and prepaid expenses and other current assets of $5.5 million), partially offset by ~~stock-based compensation expense~~net income of ~~$2.7~~$86.7 million, $3.0 million related to depreciation/amortization and ~~depreciation,~~ non-cash interest expense and ~~write-down~~$1.7 million of ~~the carrying value of our inventory to net realizable value of an aggregate amount of $0.7 million.~~stock based compensation.

Net cash used in operating activities was ~~$27.8~~$16.3 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021 and consisted ~~primarily~~ of a net loss of ~~$34.0~~$249.5 million, a net change in operating assets and liabilities of $3.8 million (mostly due to declines in accruals and accounts payables of $4.3 million, a reduction in inventory of $1.3 million and lower prepaid and other current assets of $0.7 million, reflecting reduced operational activities, offset by $1.3 million for collections of accounts receivable in the first quarter of 2021 and $1.2 million in accrued interest) and a $0.3 million for gain on extinguishment for the convertible notes and options, partially offset by ~~stock-based compensation expense of $1.8~~$180.9 million ~~depreciation and non-cash interest expense of $0.2 million, a~~due to the change in fair value of derivatives on convertible notes, a $52.7 million loss on fair value adjustment of ~~$0.3~~the option, $1.7 million ~~and a net change in assets and liabilities~~ of ~~$3.9 million (consisting of an increase in accounts payable, accrued expenses and interest, and deferred rent of $3.7 million,~~stock based compensation and an ~~increase in prepaid expenses, inventory, deposits~~aggregate of $2.0 million for increased impairment reserves, depreciation/amortization and ~~other assets of $0.2 million).~~non-cash interest expense.

Net cash provided by (used in) investing activities

Net cash ~~used in~~provided by investing activities was $19.7 million for the three months ended March 31, 2022 and primarily consisted of proceeds from the sale and maturity of marketable securities.

Net cash used in investing activities was ~~$15.9~~less than $0.1 million for the ~~nine~~three months ended September 30, 2017, and consisted of purchases of marketable securities of $25.9 million and capital expenditures of $0.3 million, partially offset by sales and maturities of marketable securities of $10.3 million.

~~Net cash used in investing activities was $9.6 million for the nine months ended September 30, 2016,~~March 31, 2021 and consisted of capital expenditures ~~of $9.2 million used for the purchase of marketable securities~~laboratory and ~~$0.4 million used for laboratory~~production equipment ~~and leasehold improvements.~~at our contract manufacturers.

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Net cash provided by financing activities

Net cash provided by financing activities was ~~$72.1~~$6.0 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, and primarily consisted ~~primarily~~ of ~~the net proceeds received~~$8.0 million from the ~~May 2017 Offering~~issuance of common stock and ~~August 2017 Offering of $66.9~~$0.2 million ~~notes payable and warrants of $5.0 million, and~~for proceeds related to the exercise of stock options and warrants, partially offset by $2.2 million in repayment of ~~$0.2 million.~~the PPP loan.

Net cash provided by financing activities was ~~$50.0~~$176.7 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021 and primarily consisted ~~primarily~~ of ~~the net proceeds received~~$152.1 million from the ~~March 2016 Offering~~issuance of ~~$45.8~~common stock, proceeds of $22.8 million from the issuance of Series A preferred stock and ~~notes payable~~$1.8 million for proceeds related to the exercise of ~~$4.2 million.~~stock options and warrants.

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Contractual Obligations

~~The following summarizes~~As of March 31, 2022, there were no material changes in our contractual obligations ~~as of September 30, 2017.~~

Payment due by period

Remainder of

After

Contractual Obligations

Total

2017

2018-2019

2020-2021

2021

(in thousands)

Operating lease obligations

$
3,600

$
154

$
1,218

$
1,278

$
950

Payments under corporate development agreement(1)

1,550

261

381

908

—

Principal payments under Notes(2)

25,000

—

20,000

5,000

—

Interest payments under Notes(2)

5,132

471

2,302

2,359

—

Total contractual obligations

$
35,282

$
886

$
23,901

$
9,545

$
950

~~(1)~~

~~Represents minimum payment obligations under a corporate development agreement to purchase current application-specific integrated circuits, which are subcomponents of the sensors used in Eversense.~~

~~(2)~~

~~Represents the principal and interest payment schedule for the $25 million principal amount of the Notes that were outstanding as of September 30, 2017~~.

~~Off‑Balance Sheet Arrangements~~

~~During three~~ and ~~nine months ended September 30, 2017 we did not have, and we do not currently have, any off‑balance sheet arrangements, as defined under SEC rules.~~

~~JOBS Act~~

In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards untilcommitments from those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) not being required to provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes‑Oxley Act and (ii) not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (b) the last day of our fiscal year ending December 31, 2019; (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous six years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

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~~Critical Accounting Policies and Significant Judgments and Estimates~~

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate.

Management considers an accounting policy to be critical if it is important to our financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by our management. Due to the significant judgment involved in selecting certain of the assumptions used in these areas, it is possible that different parties could choose different assumptions and reach different conclusions.

~~We believe there have been no material changes to our critical accounting policies and use of estimates as~~ disclosed in the ~~footnotes to our audited financial statements for the year ended December 31, 2016~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the ~~Securities and Exchange Commission~~SEC on ~~February 23, 2017.~~March 1, 2022.

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of ~~September 30, 2017,~~March 31, 2022, we had cash, cash equivalents and marketable securities of ~~$52.7~~$166.9 million. We generally hold our cash in interest-bearing money market ~~accounts.~~accounts or short-term investments that meet our policy for cash equivalents. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, based on an immediate ~~100 basis point change~~10% adverse movement in interest rates, ~~would not have a material effect on~~ the potential losses in future earnings, fair ~~market~~ value of risk-sensitive financial instruments, and cash flows are immaterial, although the actual effects may differ materially from the hypothetical analysis. While we therefore believe our cash, ~~equivalents. Additionally,~~cash equivalents, restricted cash, and marketable securities do not contain excessive risk, we cannot provide absolute assurance that, in the future, our investments will not be subject to adverse changes in market value. The interest ~~rate~~rates on our ~~Notes is~~notes payable are all fixed. We do not currently engage in hedging transactions to manage our exposure to interest rate risk.

Foreign Currency Risk

~~We expect that~~The majority of our international sales ~~through distributors and the costs we incur in connection with our international operations will be~~are denominated in Euros. Therefore, our U.S. ~~dollars. Therefore,~~dollar value of sales is impacted by exchange rates versus the Euro. Currency fluctuations or a strengthening U.S. dollar can decrease our revenue from these Euro-denominated international sales. To date, foreign currency transaction gains and losses and exchange rate fluctuations have not been material to our consolidated financial statements, and we do not ~~expect~~believe that the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have had a material impact on our operating results of operations will be materially affected by foreign exchange rate risks. However, our distributors' sales of our products in international markets to their customers will be denominated in local currencies. Therefore, it is possible that, when the U.S. dollar appreciates, products sales could be adversely impacted, as our products will become more expensive to the customers of our distributors.or financial condition. We do not currently engage in any hedging transactions to manage our exposure to foreign currency exchange rate risk.

In addition, the uncertainty that exists with respect to the economic impact of the global COVID-19 pandemic has introduced significant volatility in the financial markets subsequent to our quarter ended March 31, 2022, which could increase our foreign currency and interest rate risk.

ITEM 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Under the supervision of and~~Our management, with the ~~participation~~assistance of ~~our management, including~~ our chief executive officer, who is our principal executive officer, and our chief financial officer, who is our principal financial officer, ~~we conducted an evaluation of~~has reviewed and evaluated the effectiveness of our disclosure controls and procedures ~~as of September 30, 2017, the end~~

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~~of the period covered by this Quarterly Report. The term “disclosure controls and procedures,” as set forth~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as ~~amended, or the Exchange Act, means controls and other procedures~~amended) as of ~~a company~~March 31, 2022. Management recognizes that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the SEC. Disclosureany controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures include ~~without limitation,~~ controls and procedures designed to ensure that information required to be disclosed by ~~a company~~us in the periodic reports ~~that it files or submits under~~filed with the ~~Exchange Act~~SEC is accumulated and communicated to ~~the company’s~~our management, including ~~its~~our principal executive, financial and ~~principal financial~~accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the Our disclosure controls and procedures are ~~met. Additionally, in designing disclosure controls and procedures, our management necessarily was required~~designed to ~~apply its judgment in evaluating the cost-benefit relationship~~provide reasonable assurance of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in asuch control ~~system, misstatements due to error or fraud may occur and not be detected.~~objectives. Based on the evaluation of our disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2022, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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Changes in Internal Control over Financial Reporting

There ~~was~~were no ~~change~~changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended ~~September 30, 2017~~March 31, 2022 that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1: Legal Proceedings

From time to time, we are subject to litigation and claims arising in the ordinary course of business. ~~We are~~Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not ~~currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could~~ have a material adverse effect on our ~~business, operating results or financial condition~~.business. Legal proceedings, including litigation, government investigations and enforcement actions could result in material costs, occupy significant management resources and entail civil and criminal penalties.

In February 2021, we received notice and accepted service of a civil complaint that had been filed in the Western District of Texas and styled Carew ex rel. United States v. Senseonics, Inc., No. SA20CA0657DAE. The complaint was filed by a relator under seal in May 2020 pursuant to the qui tam provisions in the federal False Claims Act. Prior to the unsealing of the complaint, the government declined to intervene in the case. The case, therefore, is being pursued only by the relator. The complaint alleges the Company’s marketing practices with physicians for its product, Eversense Continuous Glucose Monitoring System, violated the False Claims Act, 31 U.S.C. § 3729 and the Texas Medicaid Fraud Prevention Law, Tex. Hum Res. Code § 36.002. Outside counsel, on behalf of the Company, filed a motion to dismiss the action for failure to state a claim. On March 31, 2022, the court granted the motion to dismiss the action without prejudice which allows the plaintiff 60 days to refile the complaint if they so elect.

ITEM 1A: Risk Factors

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. ~~Except for~~Other than the risk factors ~~described~~set forth below, our risk factors as of the date of this Quarterly Report on Form 10-Q have not changed materially from those described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form ~~10-K for~~10-K.

The ongoing military action by Russia in Ukraine could have negative impact on the ~~fiscal year ended December 31, 2016, filed with~~global economy which could materially adversely affect our business, operations, operating results and financial condition.

On February 24, 2022, Russian forces launched significant military action against Ukraine, and sustained conflict and disruption in the ~~SEC on February 23, 2017.~~

~~Risks Related~~region is possible. The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by Canada, the United Kingdom, the European Union, the U.S. and other countries and companies and organizations against officials, individuals, regions, and industries in Russia and Ukraine, and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military actions could adversely affect the global economy and financial markets and thus could affect our ~~Financial Results~~business, operations, operating results and ~~Need for Financing~~

~~We will need~~financial condition as well as the price of our common stock and our ability to raise ~~substantial~~ additional ~~funds in the future, and these funds may not be available on acceptable terms or at all. A failure to obtain this necessary~~ capital when needed on acceptable terms. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could ~~force us to delay, limit, scale back~~be substantial. Any such disruptions caused by Russian military action or ~~cease some or all operations.~~

Atresulting sanctions may magnify the time that the unaudited consolidated financial statements for the quarter ended September 30, 2017 included in this report were completed, we did not have sufficient cash to fund our operations as currently and planned to

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be conducted through the third quarter of 2018 without additional financing and, therefore, we concluded there was substantial doubt about our ability to continue as a going concern. At September 30, 2017, we had approximately $52.7 million in aggregate cash, cash equivalents and marketable securities, and we have insufficient committed sources of additional capital to fund our operations asother risks described in ~~this Quarterly~~our Annual Report ~~for more than a limited period of time. We believe~~on Form 10-K.

While our ~~existing cash, cash equivalents~~suppliers may source certain raw materials from Russia and ~~marketable securities will be sufficient~~Ukraine, to fund our operations into the third quarter of 2018 without substantially curtailing our current and planned operations or obtaining additional financing. The continued growth of our business, including the establishment of our sales and marketing infrastructure, and research and development activities will significantly increase our expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our expectations. As a result, we may be required to seek substantial additional funds in the future. Our future capital requirements will depend on many factors, including:

~~the cost of obtaining and maintaining regulatory clearance or approval for Eversense or future generations of Eversense;~~

~~the costs associated with developing and commercializing our products;~~

~~any change in our development priorities regarding our future generations of Eversense;~~

~~the revenue generated by sales of Eversense or future generations of Eversense;~~

~~the costs associated with expanding our sales and marketing infrastructure;~~

~~any change in our plans regarding the manner in which we choose to commercialize our products in the United States;~~

~~the cost of ongoing compliance with regulatory requirements;~~

~~expenses we incur in connection with potential litigation or governmental investigations;~~

~~anticipated or unanticipated capital expenditures; and~~

~~unanticipated general and administrative expenses.~~

As a result of these and other factors, we do not know the extent to which we may be required to raise additional capital. We may in the future seek additional capital from public or private offerings of our capital stock, which may include additional follow-on offerings or through an at-the-market facility, borrowings under credit lines or other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies, or grant licenses on terms that are not favorable to us.

We may not be able to generate sufficient cash to service our indebtedness, which currently consists of our term loan with the Lenders. In addition, although we potentially have the ability to borrow additional funds under the Amended and Restated Loan and Security Agreement, we may be unable to borrow those additional funds or we may be unable to generate sufficient cash to service any additional indebtedness that we do incur.

In June 2016, we issued secured Notes to Oxford and SVB, or the Lenders, in a private placement for aggregate gross proceeds of $15.0 million, pursuant to a Term Loan under our Amended and Restated Loan and Security Agreement that matures on June 1, 2020. We used approximately $11.0 million from the proceeds from the Notes to repay the outstanding balance under our previously existing Loan and Security Agreement with Oxford, dated as of July 31, 2014, including the applicable final payment fee due thereunder of $1 million. In November 2016, we borrowed an additional $5 million upon the achievement of certain milestones, and in March 2017, we borrowed another $5 million upon the achievement of certain milestones. Our obligations under the Amended and Restated Loan and Security Agreement are secured by a first priority security interest in substantially all of our assets, other than our intellectual property. Our Amended and Restated Loan and Security Agreement with the Lenders also contains certain restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions, as well as financial reporting requirements. We were in compliance with the affirmative and restrictive covenants as of September 30, 2017. We may also enter into other debt agreements in the future which may contain similar or more restrictive terms.

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In addition, pursuant to the Amended and Restated Loan and Security Agreement, we may also have the ability to borrow up to an aggregate of an additional $5 million upon the achievement of specified milestones, and the funding of specific tranches under the agreement, through the end of 2017. We will not be able to borrow the additional $5 million under the Amended and Restated Loan and Security Agreement if we do not achieve the specified milestones.

Our ability to make scheduled monthly payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves and our actual and projected financial and operating performance. These amounts and our performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, some of which may be beyond our control. We cannot assure you that we will maintain a level of cash reserves or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to curtail our operations, reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations. Failure to comply with the conditions of the Amended and Restated Loan and Security Agreement could result in an event of default, which could result in an acceleration of amounts due under the Amended and Restated Loan and Security Agreement. We may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and the Lenders could seek to enforce security interests in the collateral securing such indebtedness, which would have a material adverse effect on our business.

~~Risks Related to our Intellectual Property~~

We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues.

In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances, partnerships or other arrangements to develop products and to pursue new markets. Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with any future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. For example, one of our vendors who provides a component to the Eversense sensor has communicated to us its belief that one of its employees should be named as a co-inventor on a related patent application. We have communicated to the third party that its employee should not be named as a co-inventor and its employee has not been named as a co-inventor to date. In addition, we may have limited control over the amount and timing of resources that any future collaborators devote to our or their future products. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

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If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the licensed intellectual property rights or maintain those licenses. Future licensors could retain the right to prosecute and defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to obtain, maintain and enforce intellectual property protection for the licensed intellectual property. These licensors may determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would. Further, entering into such license agreements could impose various diligence, commercialization, royalty or other obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.

The medical device industry is characterized by patent litigation, and we could become subject to litigation that could be costly, result in the diversion of management's time and efforts, stop our development and commercialization measures, harm our reputation or require us to pay damages.

Our success will depend in part on not infringing the patents or violating the other proprietary rights of third-parties. Significant litigation regarding patent rights exists in our industry. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our products. The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation.

The medical device industry in general, and the glucose testing sector of this industry in particular, are characterized by the existence of a large number of patents and frequent litigation based on assertions of patent infringement. We are aware of numerous patents issued to third parties that may relate to the technology used in our business, including the design and manufacture of CGM sensors and CGM systems, as well as methods for continuous glucose monitoring. Each of these patents contains multiple claims, any one of which may be independently asserted against us. The owners of these patents may assert that the manufacture, use, sale or offer for sale of our CGM sensors or CGM systems infringes one or more claims of their patents. Furthermore, there may be additional patents issued to third parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert against us and materially and adversely affect our business. In addition, because patent applications can take many years to issue, there may be patent applications that are currently pending and unknown to us, which may later result in issued patents that third parties could assert against us and harm our business.

In preparation for commercializing our Eversense products, we are performing an analysis, the purpose of which is to review and assess publicly available information to determine whether third parties hold any valid patent rights that a well-informed court would more likely than not find that we would infringe by commercializing our products, understanding that there are risks and uncertainties associated with any litigation and no predictions or assurances can be made regarding the outcome of any such litigation. Although our review and analysis are not complete and subject to the express limitations in the preceding sentence, we are not aware of any such valid patent rights. Moreover,date we have not ~~previously performed an exhaustive review~~been notified that the supply of ~~this type,~~these materials has been significantly impacted by the conflict. We continue to monitor the situation closely and ~~we cannot~~are proactively assessing and evaluating alternative sources to bolster supply of these materials moving forward, in addition to working closely with our suppliers in any product re-qualification that may be ~~certain that it will not result in our locating patent rights~~required. Revenue relating to products manufactured from raw materials sourced from this region does not constitute a material portion of our ~~products of which we were not previously aware.~~

Inbusiness. Further, there is uncertainty regarding the future, we could receive communications from various industry participants alleging our infringement of their intellectual property rights. Any potential intellectual property litigation could force us to do oneultimate impact the conflict, including any escalation or ~~more~~further expansion of the ~~following:~~

~~stop selling our products or using technology that contains the allegedly infringing intellectual property;~~

~~incur significant legal expenses;~~

~~pay substantial damages to the party whose intellectual property rights we are allegedly infringing;~~

~~redesign those products that contain the allegedly infringing intellectual property; or~~

attempt to obtain a license to the relevant intellectual property from third-parties, which may not be available on reasonable terms or at all, and if available, may be non-exclusive, thereby giving our competitors access to the same technology.

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Patent litigation can involve complex factual and legal questions, and its outcome is uncertain. Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strainconflict’s current scope, will have on our ~~financial resources, divert~~customers, the ~~attention of management from~~global economy, supply chains, logistics, fuel prices, raw material pricing and our core business, stop our development and commercialization measures and harm our reputation. Further, as the number of participants in the diabetes market increases, the possibility of intellectual property infringement claims against us increases.business.

ITEM 2: Unregistered Sales of Equity and Securities and Use of Proceeds

Not applicable.

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~~None.~~

ITEM 3: Defaults Upon Senior Securities

Not applicable.

ITEM 4: Mine Safety Disclosures

Not applicable.

ITEM 5: Other Information

None.

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ITEM 6: Exhibits

The exhibits listed on the Exhibit Index hereto are filed or incorporated by reference (as stated therein) as part of this Quarterly Report on Form 10-Q.


Exhibit No.		Document
~~Exhibit No.~~		~~Document~~

3.1		Amended and Restated Certificate of Incorporation of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on March 23, 2016).

3.2		Amended and Restated Bylaws of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on March 23, 2016).

10.1*3.3		~~Second~~Certificate of Amendment to Amended and Restated ~~Loan and Security Agreement, by and among~~Certificate of Incorporation of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2018 (File No. 001-37717), ~~Senseonics, Incorporated, Oxford Finance LLC and Silicon Valley Bank, dated as of July 13, 2017.~~filed with the Commission on August 8, 2018).

3.4		Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on August 18, 2020).

3.5		Certificate of Designation of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on August 18, 2020).

3.6		Form of Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717) filed with the Commission on November 9, 2020).

3.7		Amendment to Bylaws of Senseonics Holdings, Inc. (incorporated herein by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K (File No. 001-37717) filed with the Commission on March 5, 2021).

31.1*		Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.

31.2*		Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.

32.1**		Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.

101.INS*		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document)

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SENSEONICS HOLDINGS, INC.


Date: ~~October 31, 2017~~May 10, 2022	By:	/s/ ~~R. Don Elsey~~Nick B. Tressler
		~~R. Don Elsey~~Nick B. Tressler
		Chief Financial Officer
		(Principal Financial Officer)

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PART I: Financial Information

ITEM 1:Financial Statements

Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2022 (Unaudited) and December 31, ~~2016~~2021	2 3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021	3 4
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2022 and 2021	5
Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021	4 6
Notes to Unaudited Condensed Consolidated Financial Statements	5 7

ITEM 2:Management Discussion and Analysis of Financial Condition and Results of Operations	17 24

ITEM 3:Quantitative and Qualitative Disclosures about Market Risk	28 36

ITEM 4:Controls and Procedures	28 36

PART II: Other Information	37

ITEM 1:Legal Proceedings	29 37

ITEM 1A:1A: Risk Factors	29 37

ITEM 2:Unregistered Sales of Equity and Securities and Use of Proceeds	33 37

ITEM 3:Defaults Upon Senior Securities	33 38

ITEM 4:Mine Safety Disclosures	33 38

ITEM 5:Other Information	33 38

ITEM 6:Exhibits	34 38

SIGNATURES	35 39


	September 30,		December 31,
	2017		2016
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,783	$	13,047
Marketable securities		22,917		7,291
Accounts receivable		2,063		251
Inventory, net		2,413		477
Prepaid expenses and other current assets		1,899		365
Total current assets		59,075		21,431

Deposits and other assets		176		105
Property and equipment, net		887		735
Total assets	$	60,138	$	22,271

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	5,125	$	3,070
Accrued expenses and other current liabilities		7,554		4,666
Notes payable, current portion		7,500		3,889
Total current liabilities		20,179		11,625

Notes payable, net of discount		16,801		15,177
Accrued interest		842		273
Other liabilities		66		73
Total liabilities		37,888		27,148

Commitments and contingencies (Note 7)

Stockholders’ equity (deficit):
Common stock, $0.001 par value per share; 250,000,000 shares authorized, 136,691,128 and 93,569,642 shares issued and outstanding as of September 30, 2017 and December 31, 2016		136		94
Additional paid-in capital		269,662		199,751
Accumulated deficit		(247,548)		(204,722)
Total stockholders' equity (deficit)		22,250		(4,877)
Total liabilities and stockholders’ equity (deficit)	$	60,138	$	22,271


2017 (remaining three months)	$	—
2018		10,000
2019		10,000
2020		5,000
Total	$	25,000


	September 30, 2017
	Total		Level 1		Level 2		Level 3
Money market funds	$	20,349	$	20,349	$	—	$	—
Government and agency securities		3,982		—		3,982		—
Corporate debt securities		18,935		—		18,935		—


	Payment due by period
			Remainder of						After
Contractual Obligations	Total		2017		2018-2019		2020-2021		2021
	(in thousands)
Operating lease obligations	$	3,600	$	154	$	1,218	$	1,278	$	950
Payments under corporate development agreement(1)		1,550		261		381		908		—
Principal payments under Notes(2)		25,000		—		20,000		5,000		—
Interest payments under Notes(2)		5,132		471		2,302		2,359		—
Total contractual obligations	$	35,282	$	886	$	23,901	$	9,545	$	950